Cool so the PATs worked pretty much like I thought they did. The trickiest thing to me is how to figure out the annuity payments which is what I figured. Privatebanker you mentioned that the calculations were calculated by the IRS? I would figure then that they are based on mortality rates. Yes I did know (and should have mentioned) that the trust is irrevocable.
A few more questions, (sorry if they are dumb)…
– you mentioned that the interest earned on the investments that the trust makes is also taxed. Is the entire interest earned each year taxed or do you take part of that interest in your annuity and that is also taxed?
– also I can you tell me what happens if you pass away? I recall that the trust can be passed on to your hiers. Also is the cost basis recalculated or no? I guess no since the cost basis of the home that was sold no longer has any meaning.
Also yes to everyone that mentioned that make sure you have a good trust attorney and CPA for these vehicles. I agree. Both my CPA and trust attorney are good but both have admitted to me they have not had experience with PATs.
