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Money Matters: Private Annuities

Money Matters: Private Annuities

We want to talk about a Private Annuity. First, refresh us on what an Annuity is.

Well, an Annuity is really just a contract between you and an insurance company. In exchange for a lump sum of money, I say okay, if I want to get an Immediate Annuity, I'm going to give you a bunch of money, but I want you to give me a lifetime income. The payback is going to be based on my age and the interest back that's built into it.

So how does the Private Annuity differ?

It's virtually the same thing except it's a contract between two individuals. You and I as opposed to you and the insurance company. The risk is really, it's an Unsecured Loan in exchange for a Capital Asset you say okay Joe, I'm going to pay you back for the rest of your life, and part of the income I get back will be tax free return of principle and part of it will be current income because of the interest it's earned.

Now, I'm going to assume there has to be some legal preparation that goes into something like that so one side doesn't mess with the other.

Absolutely and that's where you need to see a competent attorney and it needs to be drafted up and cover all the bases and contingencies to cover both parties

Give us a sense of who you see or what companies are doing Private Annuities.

Well, it's really no companies per say. It's a private contract, a lot of times you see it between family members. You can have the house or an asset or something, but what I want you to do is pay me back for the rest of my life because I need the income.


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