While annuities are contracts between an insurance company and a living person, ownership of the annuity can be put into a trust if it suits the needs and interests of the annuitant.

What happens when a trust inherits an annuity?

When a trust is the owner of the nonqualified annuity, the trust is generally the beneficiary of the annuity. After the annuitant dies, the death benefit from the annuity, if any, is then paid to the trust and the terms of the trust document control how the death benefit is managed and distributed.

What is a complex trust?

Complex Trust. A complex trust is any trust that does not meet the requirements for a simple trust. Complex trusts may accumulate income, distribute amounts other than current income and, make deductible payments for charitable purposes under section 642(c) of the Code.

Do complex trusts require annual distributions?

In order for a trust to be complex, it must do one of the following each year: Refrain from distributing all of its income to trust beneficiaries. Distribute some or all of the principal assets in the trust to beneficiaries.

Can I rollover an inherited annuity?

You can roll over an inherited qualified annuity. This type of annuity resides in an individual retirement account or employer plan. A nonspouse beneficiary has limited options regarding how to roll over the annuity and when taxes are due. Inherited qualified annuities are taxable unless they reside in a Roth account.

Can an annuity be owned by an irrevocable trust?

IRREVOCABLE TRUST-OWNED ANNUITIES AT TRANSAMERICA4 The annuitant on the contract may be a trustor/settlor/grantor, trustee, or trust beneficiary. The annuitant is the measuring life on the contract. A “pass-in-kind” strategy is available at Transamerica for annuities that are owned by irrevocable non-grantor trusts.

Do complex trusts pay tax?

Simple trusts and complex trusts pay their own income taxes. Grantor trusts do NOT pay their own taxes – the grantor of the trust pays the taxes on a grantor trust’s income.

What kind of trust is a complex trust?

A complex trust is any trust that does not meet the requirements for a simple trust. Complex trusts may accumulate income, distribute amounts other than current income and, make deductible payments for charitable purposes under section 642(c) of the Code.

Can a trust be the owner of an annuity?

Not only are most annuities sold of this type, but the Internal Revenue Code (IRC) provisions that cause most of the difficulties where annuities are owned by or payable to a trust (Section 72 (u) and certain paragraphs of Section 72 (s)) do not apply to immediate annuities.

Who is the primary annuitant of a trust?

When an annuity is owned by a trust, the holder of the annuity is deemed by Section 72(s)(6)(A) to be the primary annuitant. This provision applies to any annuity owned by an entity other than a natural person, including a corporation, partnership, or trust.

How is a grantor retained annuity trust taxed?

For federal tax purposes, this trust is treated as a grantor trust. In a grantor retained annuity trust, the grantor creates an irrevocable trust and retains the right to receive, for a specified term, an annuity based on specified sum or fixed percentage of the value of the assets transferred to the trust.