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Annuity Transfer Program

Annuity Transfer Program. Many of these annuities will remain locked with high penalties. Clients can transfer annuities without paying out-of-pocket penalties and receive a tax deduction. What are the chances your clients own some of these annuities?. Recent Survey.

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Annuity Transfer Program

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  1. Annuity Transfer Program

  2. Many of these annuities will remain locked with high penalties Clients can transfer annuities without paying out-of-pocket penalties and receive a tax deduction What are the chances your clients own some of these annuities? Recent Survey $700 Billion of tax deferred annuities are currently in-force

  3. Tax Deferred Annuities Why Do People Purchase Tax Deferred Annuities?

  4. Tax Deferred Annuities Some people purchase Tax Deferred Annuities to provide… • Accumulation of money on a tax-deferred basis • Participation in market gain or interest rate growth with a guaranteed base • Income payments or a lump sum for beneficiaries in the future

  5. Tax Deferred Annuities Tax Deferred Annuities are a unique financial product providing: • Income for life or • Income for a fixed number of years These annuities are TAX-DEFFEREDnotTAX-FREE!

  6. Fact A Life Insurance Marketing Research Association (LIMRA) study indicated: Over 90% of insurance annuities are never annuitized … They are “parked” and passed to heirs.

  7. Consequences Upon death, the full accumulation value of an annuity is subject to double taxation: • Estate Tax (if applicable) • Income Tax • Any gain constitutes ordinary income to the recipient in the year received and, the tax, if any must be paid within 5 years • This may increase the tax bracket of the recipient, which could create higher taxes

  8. 1. The surrender value is transferred… not the full accumulation value of the annuity 2. The annuity owner forfeits the surrender penalty 1035 Exchange One common option is the 1035 exchange that allows individuals to replace an existingannuity with another annuity, however: * IRC §1035

  9. A new contract is issued at the full accumulation value … not the surrender value The new contract provides an immediate income tax deduction with a 5 year carry-forward if needed Income payments may begin immediately or may be deferred NCF’s 453 Transfer A unique alternative:NCF’s Charitable Installment Purchase Plan (ChIP) May reduce taxable income by 50% * IRC §453 and 26 CFR §1.1011-2

  10. Flex-Deferred Option Features: • Income may be deferred until needed • Income will be increased for every year deferred If death occurs prior to the time income begins: • Proceeds may be distributed to beneficiaries in installments, providing spendthrift protection • Tax liability for heirs is reduced • The taxable estate, if any, may be reduced * Installment sale income includes interest income, return of adjusted basis in the property and gain on the sale.

  11. Case Study Bob and Sarah ages “70” & “68” Purchased Indexed Annuity in 2004 $100,000 Current Accumulation Value $110,000 Current Surrender Value $100,000 Surrender Penalty (10% of basis) $ 10,000 Tax Bracket: 25%

  12. The client transfers an annuity to an NCF ChIP Insurance company issues a 1099 to annuitant for $10,000 The client Receives a $59,252 income tax deduction Taxes due on $10,000 are $2,500 (25 % bracket) Which May save $14,813 in taxes Potential net tax savings $12,313 The Transfer Process

  13. The Bottom Line

  14. Flex-deferred option with 20 year pay-out Flex Option

  15. Summary • Asset is transferred to NCF • ChIP contract can remain “parked” Income payments can begin when needed Beneficiaries can receive the payments in the future • Tax liability allocated over payout period • Taxable estate may be reduced • Provides immediate income tax deduction • Tax savings provide “spendable” dollars

  16. Getting Started • Review client’s most recent annual statement • Current value /surrender value /cost basis • Determine if 1035 was previously completed • Provide accurate information or annual statement to NCF • Discuss the parameters of the ChIP program with NCF Advisor • NCF Advisor will prepare a personalized illustration for your review

  17. Next Steps 5. NCF issues ChIP contract at accumulated value 1. Present illustration to client 3. Client signs change of ownership form 4. No out-of-pocket surrender charges 2. Show benefits and value

  18. Client Profile Qualifiers Clients Over age 59½ Higher basis Non- qualified annuity Look for… 0- 50% growth preferred Annuity > 1 yr old

  19. Safety & Security NCF reinsures transactions through an insurance carrier rated “A” or higher with the rating agency of A.M. Best* * In rare cases when reinsurance is not available 100% of the present value is secured in a Master Trust account with U.S. Bank.

  20. Compensation Advisors who facilitate a transaction with NCF receive a development fee of: 5% Example:$110,000 Annuity Value $100,000 Surrender Value Advisor Receives $5,000

  21. How many dollars worth of annuities will you unlock for your clients this year? Which of your clients own some of these annuities? Now you have the key to unlock these assets! Recent Survey $700 Billion of tax deferred annuities in-force

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