Transferring annuity to Son

[jeafra10]

What is the name of your state (only U.S. law)? Colorado
I am writing for my Brother, my 85 year old Dad is wanting to buy my brother a home in Colorado. My Dad lives in Las Vegas right now. He is thinking of transferring his annuity to my brother so he can buy a home and get the 8000 first time tax credit. He is not married and has no children, he was also the benificary of the annuity anyway. In Colorado to bid on a home you have to show that you have the money in the bank or some certificate or they will not deal with you. This seems the easier way but we were worried about the tax consequences maybe. Also if my Dad buys the house in his name and then transfers it maybe that might get crazy because my Dad does seem to become very tight with the money and these homes that they are looking at in Colorado are fixer upper's and my Dad will no release the rest of the cash to complete the fix up problems. The annuity came from the sale of a home about 8 years ago, we are talking about $ 100,000. That is the amount.

 

[anteater]

My memory is that the transfer of annuity to anyone other than a spouse is considered to be a surrender of the annuity and is subject to income tax. That is the earnings will be subject to income tax - the difference between the premiums paid and the surrender value.

But one way or the other, the money would be used to purchase the property, right? The money would have to come out of the annuity, meaning a taxable event.

Also, one way or the other, there would be a gift from Dad to son that exceeds the annual gift maximum of $13,000. Dad would need to file a gift tax return for the value gifted in excess of $13,000.

A consultation with a tax professional would be beneficial.

 

[Dandy Don]

You can also contact the company holding the annuity to ask them for a form to do the transfer and/or speak to the agent who sold you the annuity or talk to someone in customer service who may be able to advise about the tax consequences.