Private Annuity Trust - The Alternative to a 1031 Exchange

Private Annuity Trust (P.A.T.): An individual transfers property to irrevocable trust. In return for the trustees promise to make annual payments to the transferor for life, there is no gift tax on the transfer, so long as the value of the property does not exceed the present value of the payments. There is no income tax consequence, so long as the transfer is made prior to a sale. The private annuity trust will let you convert highly appreciated assets into a lifetime annuity, and thereby avoid estate tax and differ capital gain tax.