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Annuity Transfer Program

Annuity Transfer Program. $1.7 Trillion of Annuities are Currently in Force. Popular Planning Tool Tax Deferred Accumulation Market Participation With Safety of Principal Income or Lump Sum. 90% of Annuities are Never Annuitized. IRD Asset (Income in Respect to Decedent)

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Annuity Transfer Program

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  1. Annuity Transfer Program

  2. $1.7 Trillion of Annuities are Currently in Force • Popular Planning Tool • Tax Deferred Accumulation • Market Participation With Safety of Principal • Income or Lump Sum

  3. 90% of Annuities are Never Annuitized • IRD Asset (Income in Respect to Decedent) • Upon Death, the Full Accumulation Value of an Annuity is Subject to Double Taxation

  4. Tax Consequences • Income Tax • Gain is Ordinary Income • May Increase Tax Bracket • Estate Taxes (if applicable) Tax Deferred NOT Tax Free

  5. Options

  6. Alternative Solution NCF Annuity Transfer • Simple Change of Ownership(Not a 1035 Exchange) • A New Contract Issued at the Full Accumulation Value

  7. Income Tax Deduction • Provides an Immediate Tax Deduction with a 5 Year Carry-Forward if Needed • May Reduce Taxable Income by 50% • Tax Savings Provide More Spendable Dollars

  8. Income Payments May Be Immediate or Deferred • Client Can Begin Income Payments at Any Time if Needed • Asset Can Remain “Parked” in Deferral for Heirs • Installment Payments Solve Spendthrift Issues

  9. Case Study Bob and Sarah ages 70 & 68 Purchased Annuity in 2004 $100,000 Current Accumulation Value $110,000 Current Surrender Value $100,000 Surrender Penalty (10% of basis) $ 10,000 Tax Bracket: 25%

  10. The client transfers an annuity to an NCF ChIP Insurance company issues a 1099 to client for $10,000 The client receives a $59,252 income tax deduction Taxes due on $10,000 are $2,500 (25 % bracket) The Transfer Process Which may save $14,813 in taxes Potential net tax savings $12,313

  11. The Bottom Line This is an educational example and is not intended to be legal or tax advice. Individuals should seek tax, legal or financial advice from an independent, professional advisor.

  12. Flex-Deferred Option Features: • Income* may be deferred until needed • Income will be increased for every year deferred If death occurs prior to the time income begins: • Proceeds may be distributed to beneficiaries in installments, providing spendthrift protection • Tax liability for heirs is reduced • The taxable estate, if any, may be reduced * Installment sale income includes interest income, return of adjusted basis in the property and gain on the sale. IRC §453 and 26 CFR §1.1011-2

  13. Flex-deferred option with 20 year pay-out Flex Option

  14. Summary • Asset is transferred to NCF • ChIP contract can remain “parked” Income payments can begin when needed Beneficiaries can receive the payments in the future • Tax liability allocated over payout period • Taxable estate may be reduced • Provides immediate income tax deduction • Tax savings provide “spendable” dollars

  15. Getting Started • Review client’s most recent annual statement • Current value, surrender value, cost basis • Determine if 1035 was previously completed • Provide accurate information or annual statement to NCF Advisor • Discuss the parameters of the ChIP program with NCF Advisor • NCF Advisor will prepare a personalized illustration for your review

  16. 1. Present illustration to client Next Steps 3. Client signs change of ownership form 5. NCF issues ChIP contract at accumulated value 4. No out-of-pocket surrender charges 2. Show benefits and value

  17. Client Profile Qualifiers Clients over age 59½ Higher basis Non- qualified annuity Look for… 0 - 50% growth preferred Annuity > 1 yr old

  18. Safety & Security NCF reinsures transactions through an insurance carrier rated “A” or higher with the rating agency of A.M. Best* * In cases when reinsurance is not used 100% of the present value is secured by assets in a Master Trust account at U.S. Bank and the general assets of New Life International.

  19. Compensation Advisors who facilitate a transaction with NCF receive a development fee of 5% Example:$110,000 Annuity Value $100,000 Surrender Value Advisor Receives $5,000

  20. New Life is a 501(c)(3) nonprofit organization established in 1979 New Life supports missions and humanitarian relief efforts throughout the world National Community Foundation is the Development Division of Not FDIC insured or insured by any federal or state government agency 103 Continental Place · Suite 200 · Brentwood, TN 37027 www.natcf.org · www.newlifeint.org · 1-800-535-2601

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