Private Annuity Contract

There is a national association for private annuity trusts napat the national private annuity trust npat and the national association for financial and estate planning.

Private annuity contract. Provided that the private annuity is correctly established you can avoid estate and gift taxes while realizing income for the remainder of your life. A private annuity is an annuity contract issued by an individual rather than a commercial insurance company. The new rules may make alternatives to private annuity contracts more attractive including installment sales or installment notes that terminate at the obligee s death. According to the irs the open transaction doctrine the assumption that the value of a private annuity contract could not be determined for federal income tax purposes has been eroded in recent years the irs is very much aware that the concept has been abused in a number of transactions that are designed to avoid income tax.

The private annuity trust is an old transaction but appears to be more popular than ever. In the past it was used most often to transfer appreciated property to family members. In 2006 the irs effected regulations that require. The private annuity trust private annuity trust is a tax deferral transaction offered to taxpayers seeking to dispose of appreciated assets often real estate.

A private annuity is an estate planning strategy in which you can transfer property from your estate to your children prior to your demise. Josephs cpa has a practice in san diego that specializes in helping practitioners resolve their clients tax questions and problems. A private annuity is a special agreement in which an individual transfers property to an obligor who agrees to make payments to the annuitant. Several websites actively and proudly promote the strategy.

If the payment from the annuity is not an annuitization of the contract for example a withdrawal the payment is subject to last in first out lifo tax rules. So assume as above an annuity. There is every reason to suggest it may be as effective for transferring cash from a cash rich estate to assure income and for saving on estate taxes. A private annuity agreement is a contract through which parties agree that a property lump sum or other asset will be paid or transferred to a party who will then pay out periodic payments the annuity to the transferor over a defined period of time.