Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I used to see the topic around but not lately.

Can anyone share the basics of a private annuity?

I am familiar with annuities but would like to have
discretion over where the principal is invested.

IE could we invest 200k in equities and bonds, let it grow
tax free and in 10 yrs start taking withdrawals which would
be taxed once we went over the 200k original contribution.

TIA for any insight.
Print the post Back To Top
No. of Recommendations: 1
Can anyone share the basics of a private annuity?

There are different types of annunities.

Single Payment Fixed Annunity is as it sounds, you buy fixed payments for your life, joint life or specific time.

http://www.smartmoney.com/retirement/planning/whats-wrong-wi...

Variable annunities, which you to control distributions and may allow control of investments, are generally not a great investment. The link above gives a description of some of the issues: High Commissions, Penalties, Fees, Restrictions and more Fees.
Print the post Back To Top
No. of Recommendations: 0
Did you try a Google search?
http://www.google.com/#hl=en&output=search&sclient=p...
There are a number links including links from Investopedia and Wikipedia.

Bob
Print the post Back To Top
No. of Recommendations: 3
Can anyone share the basics of a private annuity?

I am familiar with annuities but would like to have
discretion over where the principal is invested.


Normally you buy an annuity from an insurance company. A private annuity, by contrast, is a transaction between private parties. It is usually done between family members, as a way to finance the sale of assets, or between closely-held corporations and shareholders as a means to redeem stock.

The basics are that the assets are sold for a price that includes cash plus a series of payments structured as an annuity, to cease at either a term certain, or the death of the seller(s). This is an alternative to an installment note, which has a definite fixed amount and terms. If the annuity ceases at the death of the seller, it is not includible in his/her taxable estate, as an installment note would be.

It's not something you would normally do with funds you have, that you want to invest, unless you know a private party whose credit is as good as an insurance company.

I used to see the topic around but not lately.

There's a reason for that, too. The IRS has issued proposed regs. (of questionable legality, IMNSHO,) that effectively treat the use of a private annuity as an installment sale, for transactions entered into after October 18, 2006. This takes away most the advantage of them for estate planning purposes, and therefore, a deal will be drawn up as an installment sale instead, as that will be the tax treatment.

Bill
Print the post Back To Top
Advertisement