For a transfer of an IRA to a testamentary unitrust, there is an estate tax deduction for the present value of the remainder interest. The deduction is calculated under the tables and is based on the length or duration of the trust and the unitrust percent. This is because the IRA represents untaxed ordinary income and there is no deduction permitted for a charitable gift of ordinary income assets. However, if an IRA owner were able to use the IRA to CRT rollover, the individual would then be able to receive income under a unitrust or annuity formula, rather than the mandatory IRA increasing distribution requirements. Yes, a commercial annuity represents IRD to the extent of the excess of the value of the annuity over the cost basis.
Many individuals own annuities with substantial increases in value.
This transfer normally is done through a beneficiary designation on the annuity contract. There are two circumstances in which an early distribution does make economic sense. Similarly, this concept could work effectively for withdrawals that are used to acquire equities, if the equities may be transferred to family without gift or estate tax. This tax-free transfer could be accomplished through a gifting program using annual exclusions, or through a leveraged transfer method such as a GRAT, an FLP or perhaps a combination of an FLP and a lead trust. The Roth conversion does have economic attractiveness.