Advanced Underwriting Consultants

Question of the Day – June 15

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client is interested in making a charitable gift of a nonqualified deferred annuity (NQDA).  What are the tax consequences of making such a gift?

Answer: The transfer of a NQDA by one taxpayer to a new nonspouse owner is treated as a taxable disposition of the annuity.  In this case, the transfer to charity would be taxed as a surrender, causing the owner to recognize the income tax—and potential penalty tax—on the gain in the contract.

The entire value of the annuity contract would be potentially deductible as a charitable gift, subject to normal charitable deduction limits.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.