Split-funded Annuity is the combination of two annuity products. One is the immediate annuity and another is tax deferred annuity. The total investment of the investor is divided in these two annuities. Immediate annuity is used to pay monthly income and as this monthly income is considered as a return on the investment made this monthly income is tax advantaged. The investment made in the differed annuity is paid with the interest after a guaranteed period of time.
One example of split-fund annuity is illustrated above.