Entrust your money to someone you know.
The biggest difference between a regular annuity and a private annuity is that private annuities take place between two individuals, instead of between an individual and an insurance company. In order for a private annuity to be put in place, both an annuitant and an obligor are needed. The annuitant is giving the obligor a certain amount of money to be placed in the annuity. The obligor, on the other hand, is entering into a contract to pay a certain amount of interest on the annuity for the rest of the annuitant’s life.
There are a lot of details that will depend entirely on the type of annuity contract signed. If you are planning to get a private annuity, then you will have to discuss the exact terms with your obligor. For example, in some cases, the obligor will keep any leftover annuity money after the person who bought the annuity has died. If this is not a plan that will work for you, then you will have to discuss the terms with your obligor in order to find out whether or not you can leave the balance of your annuity to your loved ones.
In many cases, private annuities will take place between friends and family members. As a result, the interest rate is fixed by the federal government in order to make sure that all of these annuities are fair. Many people choose to do a private annuity plan for only the reason that they will then know the person who is holding their money personally. This can increase the amount of accountability that you can expect from your obligor.
At the same time, however, unless the person that you are getting private annuity with has a history of doing good work as an obligor, you might be looking at an untested person when it comes to annuities. If this worries you, then you are probably better off going with an insurance company that has good rates, and a good history of dealing with annuities fairly.
The popularity of private annuities depends a lot on the interest rates that are set by the IRS. When these interest rates (for annuities specifically) go down, it makes it easier to find somebody who is both able and willing to be the obligor for a private annuity.