Private Annuity Definition

A private annuity is an agreement between two parties, neither of which can routinely sell annuities. In a private annuity, one party-the annuitant-transfers an asset to another party-the obligor-in return for unsecured payments throughout the remainder of the annuitant’s life. A private annuity is generally used when it offers tax savings, and they are usually used to transfer assets between family members where a simple transfer would result in estate taxes-the private annuity makes such transfer, legally, a sale.