Why A Private Annuity Trust Is GoodIf you own investment property, or even the property you reside in that has acquired a huge amount of value because of appreciation then a private annuity trust can become your best friend quickly. As you can imagine the tax penalties associated with selling a very profitable piece of property can be purely astronomical, however a private annuity trust allows you to defer up to 100% of the taxes that would be due! This deferment can allow you to save thousands of dollars easily off the sale of a piece of property. This is typically not worth the time or effort however if you sell your personal residence you are generally allowed to deduct up to $250,000 of the profits if you are single and as much as $500,000 if you are married. However, amounts over these levels are required to be taxed at the present rates. A private annuity trust allows you to by pass these limits and it will allow you to defer the entire amount.
Your first step in creating a private annuity trust is to transfer the asset to the trust so that you are able to reap a return of the asset much as an annuity would function. As this transfer takes place, you are able to avoid paying taxes on the transfer of the property to the private annuity trust, which is another savings. While deferring taxes is a huge benefit of a private annuity trust, there are several things that must be carefully considered. You will be responsible for taxes on the annuity payments that are made over the lifetime of the trust, which means that the profits of the annuity that you are paid will be included in your taxable income. This amount however is usually much less than the taxes that would otherwise be due. There are however times when the taxes due are very expensive and using a private annuity trust is just not a good option. This can be for several reasons, it is always best to consult with a financial advisor or even an attorney about your own particular circumstances to ensure that you are well aware of what options you have as well as how you can best protect your money and your assets. Remember, the more property you own the more important it is to protect those assets with proper financial planning to ensure that you are not leaving yourself at risk to lose something because of missed tax payments, or even absurd tax payments when something is sold. |