Annuities and Survivor Benefits Flashcards
Transfer tax impact of single life annuity for benefit of purchaser?
Generally no inclusion if payments cease at date of death.
Transfer tax impact of survivorship annuities?
Typically included by 2036 but could technically also fall under 2039.
Are GRAT’s governed by section 2039?
No, GRAT’s are governed exclusively by 2036.
Primary contribution of 2039?
Treatment of employer-funded benefits.
Basic rule of 2039 with conditions? (3)
Gross estate includes the value of annuity payments paid to a beneficiary if (1) the decedent possessed the right to receive such annuity or other payment for his life for any period not ascertainable without reference to his death or for any period which does not in fact end before death, either alone or in conjunction with another person; (2) the annuity/payment was receivable by any beneficiary by reason of surviving the decedent; and (3) payments pursuant to a contract other than life insurance on decedent’s life.
Are payments receivable by statute included under 2039?
No, example are social security benefits to survivor beneficiaries.
Are payments under life insurance policies included under 2039?
No, dealt with under 2042.
How to determine whether to apply annuity or life insurance rules to retirement annuity with death benefit component?
Determine whether contract issuer retained any risk of decedent’s premature death as of the decedent’s death. Depends on the reserve assigned to the contract.
How to determine value of annuity payment stream?
If commercially issued, determined by reference to the cost of comparable contracts sold by the annuity issuer that provides the same payment stream. (Replacement value approach)
If company does not regularly engaged in annuities, valued in accordance with 7520 tables using discount rate equal to 120 percent of federal midterm rate.
How to determine portion of annuity value includible?
2039 includes only that portion of the annuity’s value attributable to the portion of the annuity purchase price provided by the decedent.
If provided by employer, any amounts contributed by employer of decedent by reason of employment is treated as having been contributed by decedent.
Gift tax effect of purchasing a commercial annuity that provides survivor benefits and irrevocably designates a beneficiary?
Present gift occurs of a future interest.
Gift tax effect of purchasing a commercial annuity that provides survivor benefits and beneficiary designation can be revoked?
No present transfer of property takes place and gift is not complete.
Gift tax treatment of employer-provided annuity benefits?
Generally no gift tax due.
One circumstance is if the employer provides the employee with an option of receiving a single-life annuity or a reduced joint-and-survivor annuity and the employee makes an irrevocable election to forgo the greater benefits under the single-life in favor of the survivor plan. Usually doesn’t matter because of marital deduction.
