San Francisco Real Estate - Residential

Private Annuity Trusts may provide enormous financial benefits - Part 5

This article is part 5 of a series provided by our friends at Quantum Advisors.

- Mick Orton

More questions and answers about Private Annuity Trusts:

Q. What happens if I live longer or less than life expectancy?

A. Your payments from the trust continue for as long as you live, regardless of how long you live. The payments can also be based on the joint life expectancy of you and your spouse. The IRS table is used to calculate exactly what you will receive from your trust. If you live 15 years past your life expectancy, your trust payments will continue on for 15 years past your life expectancy. If you die 15 years prior to your life expectancy, your trust payments will terminate then. Life expectancy is just the number used to calculate the size of the payments. After your death, the private annuity payments terminate and all remaining assets are passed to your beneficiaries free of estate taxes and gift taxes.

Q. Can the trust buy property at a later date?

A. Yes, the investments of the trust are extremely flexible. The main focus of the trust is to be able to make payments as agreed to you. You can even borrow from the trust. Investment strategies for the trust are handled by our company as your registered investment advisor.

Q. Is there any flexibility in the annuity payment stream?

A. You can start taking payment immediately, or you can defer payments up until age 70 1/2. The trust may issue more than one annuity contract to you at the outset, providing tremendous flexibility in income flow and timing. Once payments commence, the same payments must be made to you for as long as you live.

Q. What happens if capital gains tax rates are lowered after I set up the private annuity?

A. Politicians frequently advocate lowering capital gains rates, so this could happen. In that case, you would get the benefit of the lowered rate on the capital gains portion of your annuity payments from the time the tax rates are lowered going forward.

Q. When I sell the property, may I keep some of the cash from the sale?

A. Yes, in that case you would pay taxes only on the portion of assets that you kept out of the trust. One possible superior alternative would be to have all the assets go into the trust and then borrow out the funds you needed. This way you will not pay tax on the amount you need in a lump sum and you will be paying interest on the loan back to yourself.

Q. How can I have my tax advisor or attorney analyze the private annuity idea?

A. QFN will gladly provide your tax advisor with the technical legal information s/he needs to properly advise you. For a quick answer, have your tax advisor review: IRS Revenue Rulings 55-119 and 69-74, plus the IRS’ GCM39503 of 5/19/86 and Treasury Decision TD-8754 issued in 1998, and the Ninth Circuit U.S. Court of Appeals decision “LaFargue v. Commissioner, 689 F. 2d 845 (1982)”.

Q. I’m interested in having one of these plans put together, what should I do next?

A. Your next step is to contact QFN directly at 800-224-1053. We will communicate with your tax advisors if necessary. We will also provide an illustration of your annuity payments. To get the program put together we will help you fill out an application. Then our attorney, who is an expert on Private Annuity Trusts, will review the information and put the documentation together. We’ll assist you with implementation; it’s very simple, since we handle all the steps of the process.

For more information, or for a FREE, 10 page Tax Savings Analysis on your property, contact Gary Katz at QFN – 800-224-1053 – or email Gary@QAplan.com.

- Betsy Hartwell - Quantum Advisors

*This is the fifth in a series of articles - to be continued...

Part 1 may be read here.
Part 2 may be read here.
Part 3 may be read here.
Part 4 may be read here.

posted by SFResidence.com @ 7:06 AM