Forum topic posted in Forum on 11 May 2009| 1 comments
audience: | last updated: 11 May 2009
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Joined: 05/11/2009
Points: 30
Can “Trust Income” in a NIMCRUT be valued using the guarantees provided by either GMIB or death benefit values of a variable deferred annuity? For example, a $1,000,000 annuity, after 1 year, has a fair market value of $800,000, however, it has a guaranteed living and death benefit of $1,060,000 due to the 6% guarantee in the product. Can the beneficiary receive $60,000 (the guarantee), or $48,000 (6% of FMV of $800,000) or $0 because the annuity has declined in value?

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Joined: 11/18/1998
Points: 60
NIMCRUT and Trust Income
The general principle in determining if there is potential income is to look first at the definition of income in the trust agreement, and if nothing there is on point, then look to the applicable state trust law. NIMCRUTs that invest in commercial annuities are typically drafted with language that defines income to be any amount that is ordinary income for tax purposes, but only upon withdrawal. Since ordinary income is defined by reference to cash surrender value, you would not yet have any potential distributable income if you have this definition in your agreement. If you don't have any trust provision dealing with annuity investments, then you need to look to your state trust law.
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