What Is an Annuity?

• An annuity is a type of investment contract that you purchase from an insurance company. You can purchase these contracts with a lump sum or you can purchase them with regular payments over time. Once you buy the annuity, it can provide you with payments for a certain amount of time. You could buy the annuity for yourself or you could name someone else as the beneficiary of the annuity payments in the future.
  
  

Living Trust Basics

• A living trust is a type of estate planning tool that you can use to protect assets. When you use a living trust, you can also bypass the probate process. When you transfer assets into the trust, your beneficiaries will not have to wait for the probate court to distribute them when you die. Instead, the trustee can simply transfer the assets to your beneficiaries immediately. Once you set up a trust, you transfer ownership to the trust of the property that you wish to pass on.
  
  

Protecting the Annuity

• If you wish to protect the annuity payments for your beneficiaries, you can set up an irrevocable living trust. With this type of trust, you remove the annuity from your estate and put it into the ownership of the trust. Then when you die, creditors will not be able to come after the assets that are held in the trust. Your beneficiaries will not have to worry about losing any of the money at any point.
  
  

Grantor-Retained Annuity Trust

• One specific type of trust that you can set up and involve annuity payments is a grantor-retained annuity trust. With this type of trust, you transfer a certain amount of money into the ownership of the annuity. This trust is set up with a specific lifespan. Every year, the trust pays the grantor a certain amount of money in the form of an annuity payment. At the end of the trust's lifespan, the rest of the money is passed on to a beneficiary. (See References 3)