No problem SD Realtor, here are answers to your questions.
To clarify first of all, the annuity payments are based on the age of the owner(s) of the asset, the asset’s value and the AFR (IRS interest rate AKA Applicable Federal Rate). These factors will determine what your annuity payments are.
Taxes are paid on the annuity payments received plus if you have any additional cap gains or interest income from the investment vehicle of your choice. Just remember, trusts are taxed at a lot higher rate if the annual income from the investment vehicle exceeds something like $10k (not to be combined with your principal annuity payments). I would confirm this with a CPA. I’ve used tax-free bonds in the past because of the compressed tax tables for trusts (may not be suitable for everyone however).
If you pass away, the trust would remain until the last owners demise. Beyond that, the remaining funds are transferred to it’s beneficaries tax-free. Again, check with an attorney/cpa on that piece, who knows with the IRS.
I hope that helps! I’m not a Trust Attorney just a Private Banker and have worked with these issues for clients several times. They seem to be great alternatives to CRTs if the client wants to keep the money in the family, etc. Consult a Trust Attorney and CPA.
