Advanced Underwriting Consultants

Question of the Day – May 9

Ask the Experts!

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

Question:  My client wants to transfer his nonqualified deferral annuity (NQDA) to his revocable trust.  Is that allowed, and is it a taxable event?

Answer:  The transfer of an annuity to a revocable trust is permitted under the tax rules, so long as the annuitant is a real person.

The annuity company may have its own rules about transfers and ownership, so it’s smart to double-check with the carrier.  For example, the insurance company may consider a transfer of that type to be a surrender of the existing policy and purchase of a new one—potentially causing the client to deal with surrender charges.

Most revocable trusts are treated as the alter-ego of the trust creator—the grantor—for income tax purposes.  The IRS says that if the grantor effectively transfers an asset to himself, the transfer will not trigger any kind of tax consequence.

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.