There are 2 tax advantages. You don't pay taxes on the first sale, and the annuity does not pay taxes when it sell's it's assets.
Let's say you are a 30 years old and need to pay taxes on 14 million$ and decide to retire. As you get the money you need to pay taxes for simplicity let's call that 4 million$. You now have 10 million$ if you then buy stocks with a 5% dividend that keep up with inflation your income is 500k /year(which you do pay taxes on). However, if you ever sell those stocks you need to pay tax on how much they appreciated.
If on the other hand you setup an annuity it does not pay that 4 million in taxes. If it then buys those same stocks with a 5% dividend that keep up with inflation it's paying you (10m+4m) *.05 = 700k / year (which you do pay taxes on). And if the annuity manager want's to sell the stock and buy something else it does not need to pay taxes on the sale.
The final question becomes can you buy a life insurance policy for less than 200k/year that pays out the value of the annuity when you die. Expect your family does not pay death taxes on a life insurance policy so even that has tax advantages.
PS: In the real world all those numbers are subject to change, but it was setup by congress as a tax shelter and with proper management it can do that vary well. I only bring this up because it may be a good idea for other people on HN who decide to sell their company and retire when when they are young.
He wrote several paragraphs of wisdom, and you're here to correct his spelling. Nice. Could you reallt nopt derive his meaning despite his poor spelling?
Only what will never touch my hands (direct from purchase-event to charity) avoids taxes.
So this was just a way of making sure as much of it as possible never touches my hands.
(As compared to passing-through me: taking it as income then giving it back out again.)