Private Annuity
Barron's Insurance Dictionary:
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Private Annuity
Payment to the seller over the seller’s life expectancy for the sale of the seller’s assets . This procedure provides for the immediate removal of assets that have appreciated from the estate.
| Prior-Approval States, Prior Service Benefit, Prior Insurance | |
| Private Annuity Trust, Private Family Foundation, Private Mortgage Insurance (PMI) |
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Private Annuity
Investopedia Financial Dictionary:
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Private Annuity
An agreement between two parties in which one party (annuitant) transfers an asset to another party (obligor) in return for unsecured payments for the remainder of the annuitant's life. For the agreement to be classified as a private annuity, neither party can be in the business of selling annuities - that is, neither party can be an insurance company.
Investopedia Says:
The tax benefits of the asset transfer are the major benefit of this type of agreement. In most cases, a private annuity is used to transfer assets to a family member where a normal transfer would be subject to gift or estate taxes. The private annuity effectively makes the transfer a sale, thus removing high gift and estate taxes that would come with a simple asset transfer. The interest rate that is used for calculating the payments on the annuity is determined by IRS 7520 rates. Once this rate is set, it cannot be changed. This annuity will often be held in a trust to defer tax.
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Learn about a strategy that could help you reduce taxes, diversify your portfolio and generate income. Saving Money With A Private Annuity Trust
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Barron's Insurance Dictionary
Dictionary of Insurance Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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