Should You Consider Using a Private Annuity in Your Estate Plan?

For so many families, the thought of estate planning and acknowledging the inevitable is scary and unpalatable. No one wants to consider a future without their loved one and they often put it off until the last possible moment. However, that approach usually leads to tough decisions that need to be made in the most difficult emotion moments, which is not the best time to make such decisions.  

At Doane & Doane, we are sometimes called upon to help families who have to quickly get an estate plan together. We, of course, make sure that we do our best to serve their needs and provide them with the services that will best protect their assets in a way that is consistent with their desires.  Yet, those clients often end up saying to us that they wished that they started their estate planning much sooner.  They realized that planning months or even years in advance can better lead to long-term peace of mind for everyone.  

Well, there is one facet of an estate plan that could be beneficial for your family and help get your plan to where you want it to be.  That facet is called a private annuity .   

For many who contemplate what shape their estate will be in when it reaches the hands of their children, grandchildren, or other loved ones, questions often abound regarding tax or other liabilities that may be faced by the next generation.  Oftentimes, worries about the government taking a large part of one’s estate can lead to haphazard or inconsistent decision-making in order to preserve the estate as much as possible. Given proper planning, however, a private annuity may be the solution to ensuring the next generation or intended recipients get as much as possible.

In this article, we will discuss what private annuities are and how they can benefit your estate plan.  If, after reading this article, you have additional questions about private annuities, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA.  Call today at 561-656-0200 or fill out our online contact form . 

At its heart, a private annuity is a sale between two parties. This sale involves a transfer of assets from one party to another party who makes a promise to make a stream of fixed payments.  Importantly, no collateral is required on the part of the person receiving the assets, which makes it possible to allow for a so-called unsecured promise.  While most common in the instance of parents wishing to transfer assets to their child, a private annuity can be a transfer of assets between any two adults as well.

Once the assets have been agreed upon and the transfer completed, the party who receives the assets must begin to make the unsecured payments (which are akin to annuity payments).  In order to not run afoul of Internal Revenue Service (IRS) gift rules, the payments must be structured using IRS-approved interest rates and life expectancy tables.  One of the advantages of this payment structure is that, as interest rates decline, so does the amount of money required to make those payments.

A private annuity works best when there is the anticipation of interest rates going down over time and when a parent’s life expectancy may not fully track with the average life expectancy used in the tables.  When properly executed, a private annuity can eliminate the estate tax on the transferred assets resulting in a more advantageous situation for those to whom the assets were intended.

In sum, a private annuity is a powerful way in which to ensure that your assets go to your heirs while minimizing, as much as possible, the taxes and other fees that come out of your estate, and typically do not make it to your intended heirs.  

Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane , Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.

Estate planning is about much more than just giving away property.  It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one.  At Doane & Doane, our tax and estate professionals help people plan for retirement, consider various types of wills and trusts, make provisions for loved ones, figure out future child support, and minimize tax liability.  Experienced wills and trusts attorneys know which tools to use to get the best results for their clients.  Our lawyers can help you determine which tools are best suited to your specific circumstances.

When it comes to probate matters, such as the formal administration of an estate, Florida fiduciaries seek the assistance of the attorneys at Doane & Doane, P.A. to administer and manage their trusts and estates.  Notably, the founding partners of Doane & Doane are board-certified West Palm Beach Probate Attorneys .  With the additional advantage of certified public accountancy in their backgrounds, they present a unique combination of skills and experience which enables them to effectively settle, administer, and manage clients’ trusts and estates.

Since the day we opened our doors, we have worked hard to earn a reputation as one of the region’s most prominent tax and estate planning law firms in Palm Beach County, Florida . Our dynamic team includes the firm’s founding partners, experienced associate attorneys, and an outstanding team of paralegals, legal assistants, and support

Call the Palm Beach County lawyers at Doane & Doane, P.A.  You can reach us at 561-656-0200.  Call us today.

The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.