No. of Recommendations: 1
First, a disclaimer, I am not an estate attorney. I don't know the latest greatest tax strategies. IANAL, so don't take trust advice from me alone.

But, in general, you are right that annuities are terrible investments. It's kind of sad, because it seems like a mutually beneficial situation where a company could provide a fixed income in exchange for a set of assets after death. Feel free to run the numbers, but I suspect you'll find they are terrible. (I wonder if one of the reasons for this is the potential fraud.)

I know of no feasible way that another investment type could have a similar characteristic. Any investment that goes away after death is, almost by definition, an annuity.

But there is one other alternative strategy that you may find has similar benefits and much better upside. And that's a charitable irrevocable trust. The premise is that you give some or all of your assets to a trust that you set up. That trust pays you some amount of money (similar to annuity), but after your death (or the death of you and your spouse) the money is given to the charity.

The benefits:
* Tax Deductions : Because the trust is irrevocable, the government will give you a tax deduction now. They don't give you 100% credit, because the trust also will be paying you money, but there's a formula based on your age that the government uses to determine how much is tax deductible.
* Estate reduction : You may be able to ensure benefits for government programs like SSI/Medicaid since you technically would have less assets under your name.
* Income reduction : This may depend on the details of the trust, in general the future appreciation of the trust is all within the trust not under your name.
* You can setup the trust to invest as you direct. e.g. you could set it all up with the equity index fund of your choice (or whatever) so that it grows at much higher rates than most fixed income vehicles.
* Your assets can go to a worthy cause (of your choice) rather than an insurance company.

So it has similar benefits: a predictable amount of income, that is are larger stream of money than you could get without the trust (because of the upfront tax deduction).

The downsides:
* You are dealing with trust companies : Some of which, at least by my understanding, can be equally predatory in fees. You will have to do a good bit of due diligence to choose wisely.
* Fees : Someone has to setup the trust, do some management, etc.
* Paperwork. Lots of it.
* By definition these things are irrevocable.

--CH

P.S.
I'm far from an expert, so I'd love to hear from someone who knows more or has done this. Even if it contradicts what I say above: this is just something I did a little bit of research on a while ago.
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