This only applies to
non-qualified annuities where the advisory fee is deducted from the annuity.
Planning Point:Joint ownership of
non-qualified annuities creates more problems than it solves, including forced distribution at either owner's death.
This includes all types of qualified retirement plans such as IRAs, all non-qualified assets such as mutual funds, all
non-qualified annuities, and all cash value of life insurance.
If you have clients with existing cash value life insurance and/or
non-qualified annuities, there may be attractive ways to provide LTC protection with tax advantages and an avoidance of out-of-pocket premiums.
Moreover, life insurance policies and
non-qualified annuities can be exchanged tax-free for traditional LTC insurance policies.
Both life insurance and
non-qualified annuities can be exchanged tax-free under Section 1035 for a QLTCI (see page 554).
These hybrid Annuity/LTC plans are only available on
non-qualified annuities (qualified plans can't have a rider).
Taxable capital, whose earnings are subject to income taxes each year as it accumulates, may be placed inside of
non-qualified annuities and enjoy the advantage of not having to pay taxes on the investment earnings until withdrawal.
All examples in this series are for
non-qualified annuities.
This is because the 10-year period-certain SPIA is not payable over the lifetime or life expectancy of the SPIA owner according to one of the permitted SEPP life expectancy calculation methods of IRS Notice 2004-15 for
non-qualified annuities.
With some solutions, assets such as existing
non-qualified annuities, CDs and even qualified money can be used.
