3 Types of Special Usage Annuities

There are multiple books that have been written on special usage annuities and I will briefly go over the 3 most common used strategies for each.

Charitable Gift Annuity

In a charitable gift annuity a donor gives a gift to a legitimate 501(c)(3) charities in exchange for a lifetime income to the donor. Usually the income goes directly to the donor is set up 100% joint and survivor to the owner and the spouse. This agreement is between the charity and the donor of the gift.

The donor or donors can make a donation to the charity with cash or other types of securities. There are a lot of charities that will not take real-estate as a donation because of an incident a few years back regarding the Boy Scouts. A donor gave the charity some property and the property was contaminated and the charity was stuck with the cost of the clean up. I do not of one charity that will act as a 3rd party who will take the hard assets and they will be liable for any cleanup prior to giving the property to the intended charity.

Structured Settlements

A structured settlement is ordered by the courts because of a personal injury lawsuit. The injured party (plaintiff) agrees to receive a systematic series of payments over a lifetime or for a certain amount of years. The courts like this avenue for children or for incompetent people who will not be able to properly manage a large sum of money.

Split Annuities

A split annuity is not an annuity at all. A split annuity is a concept consisting of multiple annuities. They are structured where one annuity will make payments over a period of time while the other annuities growing to restore their original principal at the end of that time period. The owner splits their money into multiple insurance carriers. The split consists of an immediate annuity and maybe one or two more deferred annuities. Once the immediate annuity is over, the deferred annuity is placed into another immediate annuity and the process starts all over again.

The advantage of a split annuity is reliable income and that your money will last. Because you are also using different time periods, you can enjoy rising interest rates in the future and are not stuck will a an immediate annuity that is paying past lower interest rates to you for life.

To find out more about special usage annuities, click on the link below in the resource box.

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Robert holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors.

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