What is the name of your state? Maryland
I consulted a financial planner recently after looking over my father's estate after my mother died. He is concerned with minimizing any taxes due at his death and maximizing the estate.
My father is 82 years old. His estate is approximately 2 million. His estate includes 873K in 2 fixed annuities and 2 variable annuities. The combined basis in all 4 annuities is 390K. He also has an IRA of $396K from which he takes minimum distributions each year. There are 2 heirs to the estate (me and my brother). Is there any way to minimize IRD (income with respect to decedant) taxes due at his death or eliminate it? The estate assets beneficairy will be a trust at his death. I am the trustee and will be able to distribute my portion to myself if I choose. My brother's portion will remain in trust and I have sole discretion whether to distribute to him since he is not capable of managing this money. The financial planner has suggested he exchange the annuities into a single premium immediate annuity with a 10 year certain plus life payout. The annuities will generate over 90K in income each year to my father with an exclusion ratio of 67%. With the 90K he wants us to buy upto a 750K life insurance policy (he has preliminary approval on the policy). Part of the payout from the annuity will be used to pay the income taxes due each year. He is running some numbers now to match the maximum insurance that can be bought and still have money to pay the taxes so there is no extra money that my dad has to come up with each year to pay the extra income taxes. I will be the owner of the policy and the beneficiary to keep it out of his estate. He will gift $12K each year (from the annuity payout) to myself, wife, and 2 kids so that we can pay the premiums due each year. The remainder needed to pay the premium he will loan to us. The net result is that we won't have an IRD tax problem and the estate could be substantially increased if he were to die before the 10 years certain period since he will be getting all that income from the annuity for the 10 year period. Is this sound reasoning by the planner? I have my doubts since we could leave the original annuities alone and let them accumulate. If the beneficiary of the annuities is the trust then the annuities could payout the proceeds over 5 years at my father's death (I think that is right) and we could spread out the IRD taxes due over the 5 years to keep it to a minimum. Also the insurance company is rating him as high risk at a level 4 due to his previouys health problems. I'm also concerned that when he dies the insurance company may contest paying any claim even though all his health problems have been disclosed. Any thoughts would be appreciated.
I consulted a financial planner recently after looking over my father's estate after my mother died. He is concerned with minimizing any taxes due at his death and maximizing the estate.
My father is 82 years old. His estate is approximately 2 million. His estate includes 873K in 2 fixed annuities and 2 variable annuities. The combined basis in all 4 annuities is 390K. He also has an IRA of $396K from which he takes minimum distributions each year. There are 2 heirs to the estate (me and my brother). Is there any way to minimize IRD (income with respect to decedant) taxes due at his death or eliminate it? The estate assets beneficairy will be a trust at his death. I am the trustee and will be able to distribute my portion to myself if I choose. My brother's portion will remain in trust and I have sole discretion whether to distribute to him since he is not capable of managing this money. The financial planner has suggested he exchange the annuities into a single premium immediate annuity with a 10 year certain plus life payout. The annuities will generate over 90K in income each year to my father with an exclusion ratio of 67%. With the 90K he wants us to buy upto a 750K life insurance policy (he has preliminary approval on the policy). Part of the payout from the annuity will be used to pay the income taxes due each year. He is running some numbers now to match the maximum insurance that can be bought and still have money to pay the taxes so there is no extra money that my dad has to come up with each year to pay the extra income taxes. I will be the owner of the policy and the beneficiary to keep it out of his estate. He will gift $12K each year (from the annuity payout) to myself, wife, and 2 kids so that we can pay the premiums due each year. The remainder needed to pay the premium he will loan to us. The net result is that we won't have an IRD tax problem and the estate could be substantially increased if he were to die before the 10 years certain period since he will be getting all that income from the annuity for the 10 year period. Is this sound reasoning by the planner? I have my doubts since we could leave the original annuities alone and let them accumulate. If the beneficiary of the annuities is the trust then the annuities could payout the proceeds over 5 years at my father's death (I think that is right) and we could spread out the IRD taxes due over the 5 years to keep it to a minimum. Also the insurance company is rating him as high risk at a level 4 due to his previouys health problems. I'm also concerned that when he dies the insurance company may contest paying any claim even though all his health problems have been disclosed. Any thoughts would be appreciated.
