Commercial Annuity is an annuity where an individual gives money to an insurance company in exchange for the insurance company agreeing to pay the individual a sum of money per month generally for the remainder of their life. This technique is often used to circumvent some Federal and State Taxes. There is a lot of legal stipulations, but let Hoyt & Stanford handle that with you.
When it Would Come Into Play
A Private Annuity would come into play where an individual would generally sell an asset such as a business to an individual of a younger generation in exchange for the agreement to receive a stream of payments. The attractiveness of this device is that the stream of payments by definition would terminate upon the death of the individual who sold the asset so no such asset would remain in the estate of the deceased for Federal or State Tax purposes. This is an attractive device to be used by a sophisticated estate planner to remove assets out of an individual’s name for Federal or State Tax purposes.
Ted W. Hoyt practices in Private Annuities.