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Private Annuity Trust

Private Annuity Trust

A private annuity trust is a way for the owner of investments, a substantial estate or other properties to transfer his or her holdings into a trust against lifetime payments to that individual. Investments and properties can be diverted into a private annuity trust and can be sold without paying any tax or penalty. Taxes are paid only when the annuitants get payments from that annuity.

The owner of the property or the individual can't be a manager and trustee of a private annuity trust. Moreover, the trustee can't be a dependant of said property owner and nor the annuity holder or property owner can have any official decision regarding to management of the said private annuity trust. In addition to that, the trustee should be an adult.

There can be a single trustee or two co-trustees. The trustees or the trustee take decisions on how the properties, investments and estate holdings are reinvested or sold. There is no tax on selling of the properties or holdings which are transferred to a private annuity trust. Tax is withdrawn while the annuity holder gets payments.

Payments

An annuitant or a private annuity trust holder can defer payments for many years, however the payments from the annuity should start by the age or 70 . Payments continue as long as the annuity holder is alive.

Private annuity trust payments are constant during the payments of the annuity holder's life. Every payment will so remain same even if the trust earns any interest. The sum of every payment is decided by the valuation of the trust and the annuitant's age. Whichever else the private annuity trust earns is kept for the trust beneficiaries.

Benefits

As per the NAPAT or National Association for the Private Annuity Trust, the advantages of the private annuity trust are as follows:

  • No payment of the property gain taxes during selling of the property
  • No payment of the depreciation re-capture taxes during selling of the property
  • No payment of the state taxes during selling of the property
  • Generates an income stream for the lifetime of the annuitant or the lives of the spouses
  • Abolishes estate tax on assets in the private annuity trust
  • Abolishes the requirement for management of the property
  • Gives protection to the family assets
  • Provides '1031' Alternative Strategy
  • Keeps away from expenses as well as publicity of the probate

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