For those with highly appreciated residential or commercial
real estate investments who are looking for a strategy
to avoid, defer or reduce their capital gains tax consequences,
the private annuity trust offers many unique benefits.
Private Annuities Work
The process begins with a property owner transferring
ownership of the property to a dedicated family trust
2. The trust "pays" the property owner (annuitant)
for the property
3. The payment isn't in cash but with a special payment
contract called a "private annuity"
4. This private annuity promises to make payments to
the annuitant for the rest of his or her life
5. After the death of the annuitant, the trust then
sells the property
6. There are no taxes to the trust upon sale since the
trust "paid" for the property in the form
of a private annuity
to Create a Private Annuity Trust
1. The seller of the property (annuitant) can choose
deferral of annuity payments if they have other sources
of income and/or don't need payments to begin immediately
Important Information on Private Annuity Trusts
2. The IRS tax code doesn't require payment of the capital
gains until the annuity payments begin
3. Capital gains tax is paid to the IRS with an "easy
installment plan" since only that portion of capital
gains is due in proportion to the number of years the
annuitan is "actuarially" stated to live (a
65-year old will, on average, live 20 years meaning
the capital gains tax is paid over 20 years at 1/20
4. There is no interest or penalty on deferring payments
of capital gains taxes due
5. Capital gains taxes are paid with "depreciated"
dollars since the value of the dollar declines over
time due to inflation
6. The balance remaining in the private annuity trust
can grow at a rate greater than inflation to retain
purchasing power of the balance remaining
1. Payments received by the
seller (annuitant) of the appreciated property are based
upon: 1) the age of the annuitant; 2) the net selling
price of the property (actual price less any mortgages,
fees or commissions); and 3) the length of the deferral,
if any, until payments begin
2. Payments continue until the annuitant(s) die regardless
of whether it is sooner or later than the expected (actuarial)
3. The proceeds remaining in the trust are extremely
flexible and can purchase additional real estate or
more traditional stocks, bonds or money market investments
4. The annuitant can borrow from the trust
5. Believes the children will need to spend their inheritence
Upon the death of the annuitant(s), the estate receives
the remaining balance with no taxes due
Shoreline's Competitive Edge
Whatever your estate planning need, Shoreline Wealth and
Investment Management can assist you in obtaining the
best estate and legal advice available.
For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.
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Charles M. Bloom, Registered Principal offers securities
and advisory services through Centaurus Financial, Inc. - Member FINRA and SIPC - 775 Avenida Pequena, CA, 93111 (mailing address: 3905 State Street Suite 7173, Santa Barbara, CA, 93105) - CA Life Insurance License No. 0A52786 - Centaurus Financial, Inc. and Shoreline Wealth & Investment Management are not affiliated companies.
The information contained in this web site is neither an offer nor solicitation of any security or service.