What is a Private Annuity Trust?

One of the rather popular insurance products in the market these days is the private annuity trust. But as a fact, a private annuity trust is not just an ordinary investment product. It is an entire asset management tool that can help you in more ways than one.

What a private annuity trust does is to defer tax burdens that people who make major purchases have to face. What are these major purchases exactly? To be more specific, these include selling a land, a house, stocks, other assets, or even expensive toys and collectibles. When you sell these large purchases at expectedly high prices, you will also surely be faced with heavy taxes. There is no way to avoid these taxes. That's where private annuity trust comes in. It provides two major benefits. It can protect you from tax burdens and, and even forms an investment fund for you that can provide you with additional income for your retirement.

So how does a private annuity trust work? Well, for you to understand better, you can compare a private annuity trust to an immediate annuity. In fact, it is much like an immediate annuity because it can provide a lifetime retirement fund for the policyholders, with payouts beginning immediately after the contract is signed. Like an immediate annuity, a private annuity trust also requires a bulk one-time payment or investment upon the start of the contract, then converts it into a long-term and regular financial support. This is as best as assurance can get. So given all these similarities, what is the difference between a private annuity trust and an immediate annuity?

A private annuity trust works, not only with financial assets, but with assets in general. This is designed especially for people with large asset investments that they wish or plan to sell. In anticipation of the tax liabilities you will surely encounter once you sell the property, you can enter the property in question into a private annuity trust. In exchange, the annuitant will receive regular payments throughout his life. If you prefer, you can arrange it so that the payments will go on and outlive you, thus providing regular payments to your beneficiary. This is another additional benefit provided by a private annuity trust. It can carry over to your beneficiaries and have a provision that allows the contract to be a joint one, so that payments will continue to be made to your spouse after your death and until his/her death. But since the asset or property will merely be transferred into an annuity trust contract, it will not be taxed upon.

If you are wondering what a private annuity trust will do to your property, naturally, the insurer will sell the property, the sales of which will be invested and eventually given to you in recurring payments throughout your life. If you have doubts about how exactly a private annuity trust will benefit you, try computing many years' worth of tax on that property that you don't even know what to do with anymore. You will see how much you will be able to save on tax liabilities through the years.

It's easy to see whether you need private annuity trust, but rest assured that once you make that decision, you won't regret it.