Funding a Trust with Annuities? Beware.

There are income tax consequences to transferring annuities for less than full and adequate consideration. If you are considering making a gift of annuities in trust, keep the following in mind: If an individual who holds an annuity contract transfers it without full and adequate consideration, such individual shall be treated as receiving an amount equal to the excess of the cash surrender value of such contract at the time of transfer, over the investment in such contract at such time, under the contract as an amount not received as an annuity. In other words, gifting an annuity triggers gain to the annuity owner to the extent the cash surrender value exceeds basis, as a general rule. In may be […]

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