Lastly you could just consider it a retirement annuity.

Search this forum for "installment sales", "deferred sales trusts", "monetized installment sales" and "private annuities" - all of which should be treated with an abundance of caution and thorough due diligence.

He wants some cash either in lump sum or annuity in the form of interest and principal payments or continuing to receive majority of income.

The only other tact I would take if I had say $5mm or more and the child was young would be an Insurance Annuity product spread over 100 years subject to death.  

But cost is low.Should i move out to invest in alternative assets like real estate or private equity or precious metals or annuity etc with bit more cost?

Beside the use of a single asset entity as noted above, the basics available to all are that your retirement funds are exempt from creditor attachment either through Federal or state law; annuities and insurance is exempt in Texas, Florida and a number of other states, as well as homestead exemptions.

So Step #1 is to find out if it is in an IRA, or a "non qualified annuity". 

I'm diving into research on plain vanilla annuities right now.

I've considered becoming a private lender,  annuities, other insurance products, CDs or money market accounts. 

If you have significant wealth in assets that are not exempt from creditors (assets that ARE exempt from creditors are typically (sometimes depending on the state you reside in) homestead, retirement plan, annuities, whole life insurance, properly structured trust in which you are neither the beneficiary or the trustee), then containing potential liability inside a single asset like an investment property is a very good idea.