Soaring real-estate prices has helped to feed the popularity of a complex tax-savings technique called a “private annuity trust.” The strategy is being promoted as a way for investors to defer hefty capital-gains taxes on the sale of highly appreciated assets — especially real estate — and save on estate taxes, while also generating a stream of income. The trusts are being widely marketed not just by tax lawyers and accountants, but also by investment advisers and insurance agents — who may also stand to gain big fees by managing trust investments — and real-estate brokers, who hope that the strategy might help clinch property sales and attract listings.

The growing popularity of private annuity trusts, however, has sparked heated debate among tax advisers, with skeptics saying that some arrangements might be too aggressive under allowable tax rules and might not generate all the tax benefits some promoters claim. Some tax lawyers have published articles or created Web sites criticizing the trusts, with titles such as “Private Annuity Trusts: The Numbers Don’t Support the Hype.” Moreover, the Internal Revenue Service has been scrutinizing a growing number of private annuity trust transactions, and though it has not banned the practice, the agency says it has seen numerous cases that it feels do not pass muster.

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