Deferred Variable Annuity

Michael C. Crawford  -  Mar 23, 2017    

The flexible deferred variable annuity (“DVA”) is an annuity contract issued on a private placement basis. The DVA is variable because the cash value under the policy varies with the investment performance of the underlying assets.

How The DVA Works:

Premiums paid to the DVA policy are flexible as to amount and timing. Net premiums are held in a separate account backing the policy and are allocated among investment options offered by the insurr. Separate account assets are segregated from the general asset account of the Insurer. The benefit to the investor is that at no time are the assets in the separate account exposed to the credit risk of the insurer.

Advantages of U.S. Tax Compliant DVA’s:

  • Assets inside a DVA grow and compound tax-deferred,
  • Compounding of investment returns allows assets to grow much faster than assets that are subject to the U.S. federal income taxation on a current basis,
  • Income and gains in DVA are not taxable to the investor until a distribution is made,
  • The separate account is flexible and can be managed more efficiently, taking in into consideration solely economic factors,
  • U.S. persons investing directly in non-U.S. investment funds are often subject to adverse U.S. federal income tax rules on any returns.
  • Non U.S. investment funds may be held in the separate account without those tax rules applying to the investor
  • No limitation on premium contributions to the DVA policy
  • Deferral age normally 85 to 90 and is defined in the contract; and
  • Structured to maximize access to liquidity.

There is no lock-up, although in certain circumstances there may be U.S. federal income tax costs for early withdrawals or loads from or termination of the policy potentially also including a 10% penalty tax for any distributions made before the investor as attained 59 ½.

Note: The information provided is for educational purpose only. It does not constitute legal, investment, accounting, tax or other advice. As with all legal and tax matters, clients should consult with their personal financial advisor and tax advisor for information specific to their situations.

Michael C. Crawford, CFP® CLU® ChFC®

Michael Crawford of Red Bank, NJ is noted for his expertise in investment banking, High Net Worth, Wealth Management, Wealth Preservation, and Private Placement Life Insurance. He is the Managing Director of Nationwide Wealth Management, LLC and Principal of Nationwide Valuation. 855-399-5169

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