"I used an annuity with a guaranteed lifetime-income rider inside the trust," said Price.
There were many reasons this strategy was used. With the annuity, the trust was guaranteed a minimum amount of income "so I could plan my brother’s finances with confidence," he said. Also, because the trust was technically the beneficiary of the annuity, not an individual, income from the annuity was tax-favored. The annuity's annual earnings were not subject to income tax, and distributions from the trust were received at least partly as a tax-free return of investment, rather than taxed on a last-in, first-out basis, as with ordinary deferred annuities.
But the planning went beyond tax considerations. "I was also able to move my father from his house to an assisted living facility, and my brother took a room in the same place. This allowed for a more seamless transition for him while my father was still alive," said Price. "By the time my father passed away, my brother had acclimated to his new home."
The trust structure enabled financial security while the living arrangements provided the necessary ongoing care. But most important to Price was "the outcome for my brother. ... His lifestyle was uninterrupted and smoother financially."