Private Annuity

A private annuity allows for the transfer of certain assets between two parties, which are often referred to as the seller and the buyer. Through a private annuity, assets like real estate, collectables or a stock portfolio are transferred to an obligor without being taxed. Additionally, a private annuity can include more than one of these items.

While the above mentioned assets can be exchanged in a private annuity, there are so items that cannot be transferred. These items include IRAs, 401Ks or any other plans that are already tax-exempt.

Typically, a private annuity will be well thought-out by a professional so that the seller can transfer the asset to the buyer with the intention of gaining income in the structure of an annuity. This can usually be done with the aid of a licensed tax attorney.

A private annuity trust can help a person avoid paying taxes up front because the payments will be received as income. Therefore, the income payments will be taxed as they are received. An Annuitant can even defer their payments until shortly after their 70th birthday.

Traditionally, the trustee of a private annuity is a person close to the seller, such as a relative, family friend, attorney, accountant or financial planner. Most often, the trustee is one of the Annuitant's adult children.

The benefits of a private annuity are great, including a lifelong stream of income, the lack of need of asset management and the removal of estate taxes upon the death of the taxpayer. Due to this, a private annuity is most often used by the wealthy, but can be beneficial to anyone.

If you are considering a private annuity, it is important to contact a professional that specializes in private annuity trusts. Although many estate attorneys or accountants know of them, the specifics are better off in the hands of an experienced professional.