Trusts are defined as an arrangement whereby money or property is owned and managed by one person (or persons) for the benefit of another.
Annuities are defined as a contract that is created when an individual gives the life insurance company money which grows on a tax-deferred basis and then can be distributed back to the owner.
Trusts are vehicles which provide certain guarantees to the beneficiary of the trust. Unlike a will, the terms of a trust are private, trusts may have a spendthrift provision (i.e. preventing the beneficiary from spending beyond their means), they often are used in wills to make allowances for minor children (by appointment of a trustee), a trust often allows the owner of assets to divorce' himself or herself from those assets as protection against lawsuits, and trusts often offer tax benefits.
Annuities typically are categorized as Variable Annuities or Fixed Annuities. Each of these
has their own distinct characteristics. Variable Annuities are regulated by the Securities and Exchange Commission because they are securities while Fixed Annuities are regulated by the State in which they were issued. Nearly every state has been forced too enact regulations requiring that when an annuity contract is sold to a senior that the insurance company must document why the annuity was appropriate in the context of the client's financial and tax status, and investment objectives.
Unlike Term Life Insurance Policies, annuities offer several benefits which may include the rights of the annuitant to have fixed periodic payments to one (or more) persons. These payments can have a fixed period of time, or they can have a lifetime income provision. Some annuities can also be used to pay for Term Life Insurance Policies, though these are typically not a good investment vehicle for retirement as the annuitant may outlive the number of years the annuity will pay.
Before you decide which instrument is best suited for your needs be sure to ascertain the protection level that you will need. If you are investing for the purposes of retirement you will need a different instrument than if you are seeking to cover expenses that might be incurred upon the event of your death.
Protecting your assets can be done in various ways and meeting with your financial planner will help determine the best method for you.
Source: Legal View
