Annuity Arbitrage

Arbitrage is the systematic selling in one marketplace and purchasing in another marketplace with your position completely hedged so that your profits are made in the absence of time, taxes and risk. Additionally, your utilizing the arbitrage concept, your heirs may participate in tax free, probate free, cash.

Banks, corporations and insurance companies have been using arbitrage for centuries. It is simply a way to increase benefits to your clients and increase your income as well. We ensure financial legacies through the systematic use of safe money management and tax strategies incorporating life insurance and annuities. 

The life insurance, the annuity, and even the annuity proceeds paid to the debtor are protected from creditors under Florida law.

Immediate annuities involve a lump sum investment in an annuity contract in exchange for a guaranteed income stream. The amount of the income stream is based on prevailing interest rates, and most importantly, on the age and health of the annuitant. Annuitants with a shorter life expectancy because of age and health typically are offered larger periodic payments.

Life insurance premiums are also based on the same insured’s life expectancy. Importantly, different companies selling either immediate annuities or life insurance contracts sometimes use different mortality tables and make significantly different judgments on a person’s life expectancy. When the annuity issuer assumes a shorter life expectancy for the applicant than does the life insurance issuer the applicant has a financial opportunity.

Sometimes an experienced and astute financial professional can match individuals with particular annuity companies and particular life insurance companies to create a meaningful divergence in life expectancy assumptions. When the annuity company is convinced of a relatively shorter life expectancy, and the applicant’s health, although not necessarily perfect, is good enough to warrant life insurance based on a relatively longer life expectancy, the annuity income stream will often exceed life insurance premiums. In such event, the immediate annuity will provide payments in excess of life insurance premiums, and the immediate annuity both funds the life insurance and provides the individual a cash flow sheltered from creditors. The life insurance policy is typically owned by a life insurance trust to keep the insurance outside the insured’s taxable estate and to protect the death benefit from the beneficiaries’ creditors and former spouses.