Private Annuity Trusts: What REALTORS® Need to Know

By Nancy Moreland, Real Estate Business Magazine, June/July 2006

A PAT may be just the exit strategy your Baby Boomer clients are looking for.

You're nearing the close of a productive work week — your company has completed several transactions, added some listings, recruited a promising new agent and you've even managed to fit in a round of golf. The recent trouble-free days remind you why you got into real estate in the first place — for the satisfaction of helping people while earning a good income. You turn the page on your planner and find you have one last appointment before you call it a day.

John and Jane Doe are approaching 60 years of age. They own $2 million worth of real estate — an elegant family home near the city and a nice condo in the mountains. Over the years, they've taken advantage of every tax deferment possible. They're now considering a 1031 exchange. At this stage of life, however, they're ready to lighten their load and don't want to buy a bigger home than they already own. They would like to retire soon, but need more income than their 401k and savings will provide. Like many Baby Boomers, they fled the stock market after the tech bubble deflated and 9/11 occurred. The Does now have 60% of their eggs in the real estate basket and feel like they're running out of options. They'd like to downsize to the mountain retreat, but they've sunk thousands in upgrades into their family home. Like most Boomers, they're looking for a solution to financial concerns while meeting lifestyle goals.