The Private Annuity Sale: A Strategic Way to Protect Your Estate 

December 20, 2025

For individuals with substantial wealth, protecting assets, ensuring predictable lifetime income, and transferring wealth efficiently to future generations are key priorities. A private annuity sale offers a highly effective strategy to achieve these goals. By transferring highly appreciated property out of your estate, you can preserve future growth for your heirs while maintaining financial security throughout your lifetime. 

Understanding a Private Annuity Sale

A private annuity sale is a structured transaction in which you transfer a significant asset, such as a closely held business interest, investment property, or concentrated securities position, to an irrevocable dynasty trust. In exchange, the trust agrees to pay you a fixed annuity for the remainder of your life. 

This is a private arrangement, not backed by an insurer. Payments are calculated using actuarial life expectancy and prevailing interest rates to ensure a fair and precise valuation. Once the transfer is complete, the asset and any future appreciation belong to the trust and are removed from your estate. You no longer bear the responsibility or tax implications of ownership, while you retain a guaranteed stream of lifetime income. 

How the Transaction Works

The process is straightforward but requires careful planning and coordination: 

1. Asset Valuation and Sale: You transfer the asset to the trust at its fair market value. 
2. Annuity Agreement: The trust commits to pay you a lifetime annuity equal to the fair market value of the asset, adjusted for your age and prevailing interest rates. 
3. Growth for Heirs: All appreciation of the asset after the transfer accrues to the trust. The asset grows outside your taxable estate and benefits your heirs without being diminished by estate taxes. 

Illustrative Example: Suppose you own $10 million of rapidly appreciating stock. You sell the stock to a dynasty trust in exchange for a lifetime annuity valued at $10 million. If you live to your actuarial life expectancy, you receive the full economic equivalent over time. If the stock appreciates to $16 million within the trust, the additional $6 million is outside your estate and passes directly to your heirs without estate tax. 

Benefits of a Private Annuity Sale 

This strategy provides several advantages for those looking to preserve wealth and provide for the next generation: 

• Remove High-Growth Assets from Your Estate: Once transferred, the asset and its future appreciation are no longer subject to estate taxes. 
• Secure Lifetime Income: You receive a predictable annuity for life, providing financial certainty while maintaining the potential for growth to benefit heirs. 
• Maximize Wealth Transfer Efficiency: By separating ownership from the growth of the asset, you can pass more wealth to your beneficiaries with minimal tax impact. 
• Align Income and Estate Planning Goals: When structured with a grantor trust, the annuity can provide favorable income tax treatment and align with broader estate planning objectives. 

Income and Tax Considerations 

The annuity provides a reliable stream of income, which may include components of gain, return of basis, and interest depending on the structure. When a grantor trust is involved, income tax treatment can be coordinated with your overall wealth transfer strategy. Proper planning and modeling are essential to ensure the arrangement delivers both cash flow for you and maximum value for your heirs. 

Key Considerations and Risks 

• Trust Reliability: The annuity is an unsecured promise from the trust, so careful selection of trust funding and structure is essential. 
• Accurate Valuation and Documentation: Proper pricing and legal documentation are critical to avoid gift or valuation disputes. 
• Longevity Risk: Payments are calculated based on life expectancy. Living longer increases the total received; a shorter life shifts more value to heirs. 
• Execution Complexity: The strategy requires precise coordination among estate planning attorneys, tax professionals, actuaries, and valuation experts. 

Determining Whether a Private Annuity Sale Aligns with Your Goals  

A private annuity sale is particularly effective for individuals with high-growth assets who wish to secure lifetime income and transfer wealth efficiently to the next generation. When properly structured, it preserves the value of appreciating assets, provides reliable income, and allows your legacy to grow outside the reach of estate taxes. 

Partnering with an experienced team is essential to ensure the transaction is executed accurately, legally compliant, and aligned with your long-term financial and legacy goals. 

Investment, Trust, Estate Planing, and Wealth Planning Products are Not insured by the FDIC; Not a deposit or other obligation of, or guaranteed by, the depository institution; Subject to investment risks, including possible loss of the principal amount invested 

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Please consult your tax or legal advisor for guidance specific to your situation.