The Transfer of Ownership of a Non-Qualified Annuity
You can give someone else ownership of your non-qualified annuity by simply filling out the paperwork from your insurance company. Non-qualified annuities are often used as long-range savings vehicles that allow investors to earn a more generous return than a bank account. The growth in the annuity isn’t taxable until you withdraw it, and some annuities offer guarantees on your principal and returns. Your annuity is likely tied to your life, but you might transfer ownership for tax or cash flow reasons.
Transfer to Another Person
Signing over your annuity to someone else has immediate implications. That person now has the power to withdraw funds, begin payments or change beneficiary. So long as you transferred ownership more than three years before dying, the value of the annuity won’t go into your taxable estate. But if you give the annuity as a gift, you have to pay tax on any gain at the time of the transfer. Additionally, you might be liable for gift taxes depending on the value of the annuity.
Transfer to a Trust
You can transfer ownership over to a trust as well. There are numerous reasons why you would put an annuity in a trust. That arrangement might allow you to remove assets from your taxable estate or prevent the beneficiary from mismanaging a large sum of money. The trust can use the annuity for tax-deferred growth or to fund regular payments. When you transfer to a trust, you incur gift taxes on the annuity’s value.
Transfer to a Charity
Annuities don’t provide the best tax benefits when transferred to a charity, but there might be other reasons to donate one. You have to report any untaxed gain as income the year that you make the transfer. The charitable donation deduction typically would eliminate any extra tax you would owe from recognizing the gain, but it doesn’t provide much in tax savings. Giving an annuity to charity might be an efficient way of avoiding surrender charges on an annuity you want to get out of.
How to Transfer
When you want to transfer ownership of an annuity, you’ll need to contact the insurance company. The company maintains its own paperwork for requesting the change. You’ll likely need to sign the documents in front of an agent or a notary public for the company to accept it. The new owner will have to sign the transfer document as well and provide taxpayer information on a completed Form I-9.
Sean Butner has been writing news articles, blog entries and feature pieces since 2005. His articles have appeared on the cover of "The Richland Sandstorm" and "The Palimpsest Files." He is completing graduate coursework in accounting through Texas A&M University-Commerce. He currently advises families on their insurance and financial planning needs.