1031 Exchange Alternative: Private Annuity Trusts to Defer Capital Gains Tax

1031 Exchange alternative for Real Estate and Appreciate Assets to Avoid & Defer Capital Gains Taxes

Private Annuity Trust -1031 Exchange Alternative for Appeciated Assets to Avoid/Defer Capital Gains Tax

Private Annuity Trusts - Frequently Asked Questions - 4/22

How can I know the amount of my payments?
What happens if I live longer or less than life expectancy?
What if I want to change the payment amounts?
What if I need some money before annuity payments begin, or what if I need more than the payments?
Are there any flexibilities or variability's in the annuity payment stream, such as increasing the payments over time?
Can I cancel the whole deal after a few years and get my money?
How much interest will I earn on the unpaid balance?
What happens if capital gains tax rates are lowered after I set up the private annuity?
How long can the deferral period be?
Can the deferral period be shortened once the private annuity is setup?
What guarantee do I have that the annuity payments will be made?
What happens if the trust goes broke before I die?
How does the private annuity trust compare to an installment sale?
Who serves as the trustee?
Can my spouse be either trustee or the beneficiary of the trust?
How do I manages the trust's investments?
Do I sell the property and put the cash in the trust?
May I keep some of the cash from the sale?
If the annuity payment is fixed, what happens if the trust makes more money than that?
What happens to the money left in the trust after my death?
How can I have my tax advisor or attorney analyze the private annuity idea?
My attorney (or CPA) has never heard of a private annuity, or doesn't think it is legal. What "proof" is there that this strategy is legitimate?
What risks or other negative factors are there?
I am interested in having one of these plans put together, what should I do next?

What if I need some more money before annuity payments begin, or what if I need more than the payments?

The trust can lend money to the annuitant, but the loan should not be substantially all the trust's assets, probably no more than 10% of its assets.

The loan should be structured the same way a bank would: Fully secured, market interest rates, formal loan documents with a realistic repayment schedule, and enforced repayments.

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Ronald L. Noll,
CEA, CPA, MST
Director NAFEP
Noll & Co, Inc.
18 E. Lancaster Ave
Malvern, PA 19355

(800) 360-6655
(610) 644-5807 fax
(610) 644-3750 x146

NAFEP

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