With traditional retirement accounts, any non-withdrawn account value is tax deferred during Generation 1’s lifetime, but withdrawals by the account owner are subject to income taxes. Required minimum distributions also kick in at age 72. However, with a stretch annuity, Generation 1 has no required distributions, withdrawals are optional for Generation 2, and distributions can be spaced out across Generation 3’s expected lifetime. In short, there’s a lot more flexibility and the income tax implications can be well-planned for and spaced out.
Traditional retirement accounts are also subject to estate/gift/transfer taxes upon Generation 1’s death, and if Generation 1 makes Generation 3 their beneficiary GST would also apply. For the stretch annuity, however, growth that occurs after Generation 1’s transfer escapes both taxes.
Hortz: Can you provide some guidance or a recommendation on how advisors should be incorporating private placement products as niche strategies for their UHNW clients?
Jahde: Advisors don’t need to be subject matter experts when it comes to private placement products. As their partner, that’s our job. The advisor’s role is to recognize the potential benefits private placement products offer UHNW clients seeking low cost and tax-efficient solutions capable of shielding account earnings from taxation, then to include these solutions in their conversations with clients.
We invite advisors to our Insights page on our website and we are happy to have an introductory Zoom call with advisors and their clients so they can further learn and explore private placement concepts.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with fintech and financial services firm members to openly share their unique perspectives and activities. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Ultimus Fund Solutions, NASDAQ, FLX Networks, Advisorpedia, Pershing, Fidelity, Voya Financial and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).