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Private Placement Annuity

Most sophisticated high net worth investors do not use "retail" variable annuities as an investment vehicle for the following reasons:

  • Investments are limited to mutual fund sub accounts
  • Retail commissions and fund loads
  • High Surrender charges
  • High Mortality & Expense (M&E) charges

Enter, Private Placement Annuities. First and foremost, a Private Placement Annuity is an institutionally priced contract with no surrender charged or hidden fees. The M&E charges are fully disclosed and line itemed.

With regards to investments, a private Placement Annuity, provides access to sophisticated and alternative investment classes typically used by high net worth clients such as hedge funds, hedge funds of funds, commodities, real estate, high yield bond funds etc. The client may designate a hedge fund or traditional money manager to manage his or her assets paid into the Private Placement Annuity so long as certain criteria are met. Specifically, the manager must have full discretion and also be structured as an "Insurance Dedicated Fund (IDF)," a carrier approved platform for managing Private Placement Annuity investments.

A Private Placement Annuity provides for unlimited tax deferred growth on contributed assets while they reside within the policy. Income tax is deferred until such time as the assets are withdrawn from the policy. Similar to an IRA with respect to withdrawal treatment but unlike an IRA contributions are not limited and there are no mandatory distributions at age 70 1/2. The following are the benefits of a Private Placement Annuity:

  • Effectively priced to maximize wealth accumulation - tax deferral provides "Structural Alpha"
  • Elimination of K-1s
  • No surrender charges
  • Investment flexibility
  • 1035 tax-free exchange opportunities maximize existing annuities or life insurance cash values from a cost and benefit perspective
  • No limitation on contributions or withdrawals*
  • Enhanced creditor protection
  • Transparent structure from both a price and regulatory perspective
  • No underwriting requirements
  • Issue ages 18-80
  • Deferral can occur til death
  • Annuitization options available if desired

Withdrawals from a Private Placement Annuity, prior to age 59 1/2, will incur a 10% IRS mandated penalty in most instances.

Please contact us for a comparison of a taxable investment vs the same investment within a Private Placement Annuity.