Private Annuity

Definition

• A financial agreement between two parties where one party agrees to transfer an asset to another other party in exchange for income payments for the rest of their life. Neither party of the agreement may be an insurance company for the annuity to be considered a private annuity. In many cases, private annuities are used in estate management to minimize gift and estate taxes.

Synonyms
estate transfer annuity, family annuity

Related Terms and Acronyms

• Annuitization — Definition,
  • The process of turning a retirement plan or annuity into income in the form of periodic payments or a single lump sum.
• Annuity — Definition,
  • A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
  • A financial instrument that disperses a number of payments over a set period of time.
• Annuity Contract — Definition,
  • A contract that outlines each party's responsibilities as they relate to an annuity.
• Charitable Gift Annuity (CGA) — Acronym, Canada, Very Important,
  • A method to facilitate charitable giving whereby an individual transfers assets to a charity in exchange for a tax deduction and lifetime retirement income payments from the charity.
  ➥ A form of planned giving.
• Estate Planning — Definition,
  • The process of determining how assets will be dispersed after an individual's death, ideally in the most tax-efficient way possible.
• Gift From a Family Member — Definition,
  • A gift of cash, to a mortgage applicant from a relative by blood or marriage, which the applicant is not required to repay. In some instances it is necessary to provide a written statement to that repayment is not required.
• Life Annuity — Definition,
  • An annuity that will continue to make payments until the death of the annuitant.
• Life Insurance — Definition, Very Important,
  • An arrangement where an insurer agrees to pay a benefit to one or more beneficiaries in the event of the policyholder's death.
  ➥ CanEquity offers life insurance.
• Payout Phase — Definition,
  • The phase of a deferred annuity where the annuity begins to make payments to the annuitant.
• Straight Life Annuity — Definition,
  • An annuity that stops all payments upon the annuitant's death.
• Tax Deferred Annuity (TDA) — Acronym, Important,
  • A type of annuity where taxes are deferred until the annuitant decides to withdraw money from the annuity.
  ➥ More commonly known as a Tax Sheltered Annuity (TSA).