Private annuity trusts defer capital gains and depreciation recovery costs for property owners who don’t need immediate sale proceeds. The owner transfers ownership to a trust, receiving predetermined payments for life, while the proceeds are invested by the trustee. Payments are taxed only when received, offering tax benefits until age 70. The program is open to any commercial or residential property, except the trustee cannot be the seller.
A private annuity trust is a capital gains deferral program that helps with both high capital gains and depreciation recovery costs. This plan is beneficial to the owner of a commercial or residential property who does not immediately need the money from its sale. With many people facing high taxes on highly prized properties, a private retirement institution offers an option to save money.
In a private annuity trust, the owner “sells” the property to a trust by transferring ownership before the actual sale of the property. The trustee’s “payment” is in the form of a private annuity contract. This contract is set up to make a predetermined number of payments for a specific, pre-calculated amount over the rest of the owner’s life. The annuity payment is calculated with a formula using the amount of the proceeds from the sale, the age of the owner, and the interest rate stipulated by the IRS.
The proceeds from the sale of the property are then held in the private annuity fund and can be invested by the trustee. Payments can only be made to the owner for the pre-established and agreed amount. Any income generated by the private annuity trust must be held for the beneficiaries of the trust.
The landlord is taxed on annuity payments only when they are received, rather than the full amount when sold. Payments don’t have to start immediately, making Private Annuities Trust a smart choice for retirement. Until payments start at age 70, the owner is eligible for tax benefits.
The Private Annuity Trust Program makes it easy for homeowners to take advantage of its benefits. The property for sale can be any commercial or residential property – even a principal residence or rental property. One stipulation is that the seller and the trustee cannot be the same person. The designated trustee can be any relative, including an adult child, as long as they are not an employee.
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