Hello mavrik07. Thanks for joining our event today.
1. I would like to start by saying that these are complex issues, and you should not engage in this transfer without professional advice and assistance. However, I will give as simple an answer as I can here. Typically, if an annuity is transferred to a grantor trust, the ownership remains the same, and therefore there is no transfer for income tax purposes. (Annuities transferred to non-grantor trusts would incur taxable recognition of gain.)
2. Changing the beneficiary to a trust will impact the tax consequences. The trust would be required to realize the income from the annuity, and pay taxes on the gain/earnings beyond your investment, within 5 years of your passing. In contrast, typically a living beneficiary would have 3 options: take a lump sum taxable payout, take the proceeds over 5 years, paying taxes as they go, or schedule withdrawals based on their expected lifespan. A trust cannot stretch the payments over time as it has no lifespan. (the payments would go on for eternity)
