- quote -


And in all probability, the tax rate at that age should be even less than
now


- quote -


If is IS payable to a TRUST, then the Trustee would normally bear
the Tax Burden. However, I do believe that in order to CYA, it should
be discussed ( and NOTED in the file) BEFORE the 10 day


- quote -

Generaly speaking that is true. TWO (2) New Commissions


Cal Lester CLU

must have had a "halfheimers" moment.
Cal


"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:zl2qf.322854$zb5.45917[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

So here's were we ended up; thought you might like some followup.

We have $580,000 of basis in the life contract with a cash value of
$815,000. Dumping (1035 exchange) that into a single premium
immediate annuity (joint lives) results in a $66,000 (+/-) payment
until the last to die (not decreasing). The excludable portion comes
out to $31,000; therefore $35,000 is ordinary income. We're going to
estimate $15,000 in taxes, for the sake of discussion.

So either we use the net after taxes ($66,000 - $15,000) or $51,000 as
our premium amount, or have the client pay the income taxes out of
pocket and use the full $66,000 annuity payment as the premium. The
latter amount results in a $900,000 increase in death benefit over the
original $1.9 million benefit. We've found a joint UL policy from Sun
Life the most competitive; guaranteed death benefit to age 115 (I
think), cash values not guaranteed (which the client doesn't care
about).

But here are a couple of issues which came up. The CPA brought up the
issue that when the client fully recovers his $580,000 basis, all the
rest of the annuity payments are fully taxable. Section 72(b)(2). I
had forgotten about that, and failing to bring it up initially cost me
some credibility (and rightfully so). Of course, it's extremely
unlikely the client/spouse will live another 17 years, more or less,
to fully recover their basis, but for better or worse, the wife's
family is very long-lived. So that's an issue to think about. Our
position is "so what?" In 17 years you have to pay ordinary income
tax on $66,000 instead of $35,000. Big deal; have the kids pay it. Of
course, it's easy enough for us to say "so what," it's not our money.

But another issue which didn't come up, but is troubling to me, is
understanding to whom the annuity income stream is taxable. To the
trustee, the owner of the annuity? To the grantors, the annuitants?
Or to the beneficiaries? I don't know.

If it's income to the trust, which is what I'm thinking, then we have
to pay tax at the trust's tax rates, file appropriate returns, etc.
And then if the client pays the tax bill, that's surely additional
gifts to the beneficiaries. Crummey letters? So you see here's
another bag of worms I really didn't want to open up without knowing
the answer. Now, should I raise the issue to the CPA/client before
or after the 10-day free look?

Also, and unfortunately I'm not the agent, just the back-office
lackey. But it seems to me when we sell the annuity, there's
commission on the dump in. Then, since the life policy is with a
different company, those premiums are commissionable too!



On Tue, 20 Dec 2005 19:37:53 -0600, "Elizabeth Richardson"
<erichktn[at]worldnet.att.net> wrote:

- quote -

Well,. that's much clearer. What you said, however,. was that you CANNOT do
a Life to Annuity Transfer. Then you said that you CAN do a Life to Annuity
transfer.

Elizabeth Richardson

"cal lester" <cal-lester[at]comcast.net> wrote in message
news:do9tvs$h04$1[at]domitilla.aioe.org...
- quote -

Hello Confused;

The reason that one IS permitted to do a 1035 from Life to Annuity, is that
the exchange is for "dollars" only.
You are exchanging the dollars in the Cash Value Account (NOT the Death
Risk) into the dollars
of an annuity. Therefore there is NO Income Tax consequence at that time.

HOWEVER, if one were to be permitted to exchange the value of an Annuity
(cash) for a NEW Life
policy, the potential GAIN due to RISK represents a taxable event (according
to the INFERNAL revenue)
Cal Lester CLU


"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:cf_pf.321709$zb5.54752[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

- quote -


Cal, call me confused.

Elizabeth Richardson

"Jason Profit" <JasonProfil[at]verizon.net> wrote in message
news:eq1fq1hjq1fh0pjoco9948bfo7cokfshp6[at]4ax.com...
- quote -


Not only King Kong, but the Irrespoonsible Relations Service ! ! ! !
You can NOT do a 1035 from ANY form of Life Policy to an ANNUITY.

A 1035 can only be done from one product to another LIKE product.
Annuity to Annuity / Life to Life. You can however do a 1035 from Life
to Annuity, because there is NO transfer of RISK, only assets (C/V) from
the Life to the Annuity.
Cal Lester CLU

I have a 72 year old make (standard) and 71 year old spouse (standard)
sitting on a survivorship policy (1982 issue) inside an ILIT. Face is
$1.9 million; basis $520,000 and cash value $820,000. We want the
trustee to 1035 the policy into a joint life immediate annuity;
receive the annuity payments, pay the tax on the ordinary income
portion, and use the remaining payment to pay the premium on a new
survivorship policy with a face amount of $2.2 million.

So it looks like we're getting the couple an additional $300,000 of
coverage for the cost of some paperwork (tax return filings, etc.).
All the illustrations seem to have been run correctly, yet this
transaction stikes me as something that "shouldn't" work, although it
looks like it does.

Are we missing "the elephant in the room here" (or perhaps it's King
Kong) that makes this transaction unworkable?