By Drew Gurley
When most people hear “annuity,” they think of an element of a retirement plan designed to create steady income.
While that’s true, there are also additional and often overlooked uses for commercial annuities as part of gifting and estate planning strategies.
With the right design, a commercial annuity contract can give structure, tax advantages, and peace of mind for both the giver and the beneficiary which is most often educational institutions.
My name is Drew Gurley and I have been helping people structure gifting strategies using insurance products for nearly 17 years.
Do You Want a Commercial Annuity Quote to Review?
Call or Text Drew Now to Request a Quote
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What Is a Commercial Annuity?
A commercial annuity is an insurance product issued by an insurance company where you contribute either a lump sum or periodic payments in exchange for guaranteed future income.
Unlike private annuities, which are agreements between individuals, commercial annuities are backed by an insurance company’s financial strength and regulated under the Internal Revenue Code (IRC) and the Internal Revenue Service (IRS).
That added oversight means predictable results, which can be critical when aligning your gifting strategy with long-term goals.
How Commercial Annuities Support Gifting Strategies
If your goal is to leave more than just a check, commercial annuities can provide structure and discipline. Instead of passing on a lump sum that might be spent quickly, you can ensure your beneficiary receives annuity payments over time such as monthly, quarterly, or annually.
Here are a few ways they fit into gifting and estate planning:
- Charitable Gift Annuity: Partner with a nonprofit organization to leave a charitable deduction while ensuring lifetime income for an annuitant.
- Deferred Annuities: Grow funds tax-deferred until they’re distributed to a loved one or charity.
- Estate Planning Tools: Reduce exposure to estate taxes by converting assets like real estate or cash into structured annuity payments.
- Beneficiary Protection: Designate a primary beneficiary and even a contingent beneficiary, ensuring that payments or a death benefit pass smoothly after the decedent.
Key Benefits
- Tax Efficiency: Many commercial annuities allow for tax-deferred growth. Certain gifting arrangements may even qualify for partial tax-free treatment or a charitable deduction, depending on the structure.
- Predictability: Clear payout schedules and structured periodic payments protect against overspending or mismanagement.
- Flexibility: Options exist for fixed payouts, deferred growth, or endowment-style strategies.
- Control and Protection: The giver can maintain control over how gifts are distributed, with contractual guarantees from an insurance company.
Important Tax Considerations
Because annuities intersect with the Internal Revenue Code, it’s important to understand potential tax consequences:
- Annuity income is often taxed as ordinary income, not capital gains.
- Some arrangements may reduce gross income or allow for after-tax contributions to grow tax-deferred.
- If a surrender occurs, there may be a surrender charge or reduction in surrender value.
- Charitable structures, such as a charitable remainder trust, may provide a charitable deduction while still generating income for an annuitant.
- Depending on timing and payout design, tax due can vary significantly.
That’s why working with a knowledgeable professional—and often a tax advisor or other tax professionals—is key before locking in a commercial annuity contract.
Who Should Consider This?
- Parents or grandparents seeking to provide stable, lasting gifts.
- Business owners converting assets like real estate into a predictable gifting vehicle.
- Individuals with estate planning needs who want to structure distributions while minimizing estate taxes.
- Philanthropists looking to create a legacy through a charitable gift annuity with a trusted nonprofit.
Why Work With a Professional?
Every annuitant’s situation is unique.
The right commercial annuity strategy depends on age, goals, after-tax resources, and long-term estate planning objectives paired with a historical track record of gifting.
I help clients cut through the complexity, exploring commercial annuities alongside traditional strategies like trusts and endowments with the help of my network of estate planning attorneys and CPAs to ensure the right fit.
Do You Want a Commercial Annuity Quote to Review?
Call or Text Drew Now to Request a Quote
Contact Drew Now: 314-795-5366
(No Obligation & We Never Sell Your Information)
Final Thought
If you’re looking for ways to structure your gifts for family, charities, or both, commercial annuities may be the answer.
With careful planning, you can balance tax advantages, predictable payouts, and lasting impact.
Let’s connect to explore how commercial annuities can support your gifting strategy.
Contact us today to discuss our team approach of helping you best leverage a commercial annuity.