Should a Variable Annuity be included in a Living Trust? Why?

Question

I have been advised that it is better to transfer title of my variable annuity into my living trust. I have also been told to just make the living trust the beneficiary of my variable annuity. I live in California. Can you point me in the right direction.

Answer 1

Cashing out the annuity prior to age 59 1/2 will probably trigger tax penalties, so be careful there.

The two options you state will have similar results, the only difference that immediately comes to mind is in the event of your incapacity. If the VA is in the trust, a successor trustee would have authority to make transactions for you. If you just name the trust as beneficiary that would not work. Having a durable power of attorney would address your incapacity issue.

My primary question for you is what is the purpose of the trust? I find many buy trusts because they think they should, but don't really know what they are getting or why. Make sure the type of trust addresses your needs. For example, many people think their revocable trusts will protect assets from estate taxes and medicaid spend-down; this is false.

Seek the help of a competent attorney or Certified Financial Planner to sort out your financial needs.

Good Luck!

Answer 2

It depends on "why" you have a Living Trust.

If it is to avoid probate ... then no, you do not need to put your annuity in it. An annuity transfers by contract and avoid probate.

If it is for privacy ... then no, you do not need to put your annuity in it. Again, an annuity transfers by contract and as such is not a public record.

If it is to provide for management of your assets as your age and might become incapable of managing the for yourself ... then yes, you should put the annuity in your Living Trust.

Answer 3

Personally, I would cash out the annuity and invest in mutual funds.

Answer 4

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