DEFERRING CAPITAL GAINS TAXES WITH THE PREMIER VI PRIVATE ANNUITY TRUST^©

Private Annuity vs. Charitable Remainder Trust:
A competing strategy to the private annuity is a program known as a “charitable remainder trust” or CRT. The private annuity has several advantages over the CRT, and virtually no disadvantages:

1. Private annuity payments are often higher, due to the fact the annuity returns all principal, with interest, whereas the CRT pays income (interest) only.
2. The private annuity allows much greater flexibility in investment choices. This is due to the fact the annuity is not “qualified”, not regulated by the IRS, whereas the CRT is.
3. A large advantage the private annuity has is that all the benefits stay in the family, where a charity will receive some of the benefits of a CRT. For example, if the private annuity trust earns more money than it needs to make the private annuity payment, that excess may be paid to the beneficiaries. In a CRT there is no such thing as “excess”. Further, when the annuitant dies the family receives all the remainder in the private annuity. With the CRT the remainder goes to the selected charity.
4. Mortgaged property cannot be transferred to a CRT program, but it can be with the private annuity.

One problem with the CRT approach is that the annuitant could die early, leaving the family with no further benefits. If the annuitant died right away, as sometimes happens, the entire asset would be lost to the family. To solve this problem, most CRT’s are sold with a life insurance policy on the life of the annuitant. Of course that further reduces the amount of money the annuitant gets from the CRT.

Finally, if in spite of the private annuity advantages the annuitant is charitably inclined, the private annuity may still be the strategy chosen, using a charity as the beneficiary of the private annuity trust. Then there really is no advantage to the CRT.