A private annuity trust,


A private Annuity is a trust in which the property owner transfers ownership of the property to a trust before completing a sale to a buyer.

The trust pays the owner for the property, not in cash, but with a special payment contract called a private annuity that stipulates that the trust will make payments to the owner for the rest of his or her life – essentially in installments. The trust often names the property owner’s children as beneficiaries. The trust can then sell the property to the buyer, getting cash for the property. (wsjdn.wsj.com)

Private annuity trusts can help real-estate owners defer capital-gains taxes on property sales.

Commercial Insurance Company Annuities can NOT be used to fund your Private Annuity Trust.

For more information or help on Private Annuities – just contact the web sites below that we’ve linked to, when we did our Internet Research (Google)  I have NEVER done a Private Annuity – One of my Tennis Buddies asked about it.  I did the research and here it is.    Please complete and return the fact gathering form and we can have our expects at United Wealth help you out.

1) A Private Annuity is an annuity issued by a company that normally does not issue annuities.

2) They must be amortized starting no longer than 360 days after the transaction.

3) You can issue them on up to two lives either as a joint or two separate contracts.

4) They must be calculated using at least the Applicable Federal Rate. That rate is issued by the Feds on the 20th of each month. The rate may exceed the AFR but can not be less than the AFR.

5) Annuities can be calculated over the life expectancy of the annuitant(s).

6) They cancel at the death of the annuitant and no balance is due to the seller.

7) The gain by the seller is recognized as the annuity payments are received.

8) Interest received is ordinary income to the seller.

9) Gain is taxed at the then prevailing, when received, gain tax rate.

10) They require an actuarial calculation.

11) There is a written annuity contract that is required.

12) You can tie them to an Installment Sale [More on sales agreements] which can be interest only for a period of time. United Wealth

Consumer Resources

The National Underwriter Company – Tax Facts has some excellent research on taxation of Private Annuities

Trust Investments. There is substantial flexibility in making investments with the trust’s funds. The money may be invested in securities, real estate, or even in a new or existing business. Many investment advisors recommend using the trust funds to purchase a commercial variable annuity as the best tax advantaged investment vehicle, while other advisors may recommend mutual funds or individual stocks for the trust. The primary requirement of the trust’s investment program is simply to produce the cash flow necessary for the private annuity payments to the annuitant.

Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.  (TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 121 )  Publication 523 Selling your home

California Personal Income Tax Booklet #540

Per my CPA – The state capital gains rate is the same as its regular tax rate …

New Penalties for Tax Shelters ? The IRS received new legislative power to go after anyone who is attempting to take advantage of tax programs designed solely to shelter income.  My advice has always been to stay away from these edgy investment programs.  If you must look into these programs, make sure to have a tax attorney review your documentation.

IRS Site on Abusive Tax Schemes

IRS Publication 550 – Investment Income & Expense – Including Capital Gains & Losses

Estate Planning Attorney’s

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