What is an 'Annuitant'

An annuitant is a person who collects the benefits of an annuity or pension. It is the person named in a specialized life insurance contract. The annuitant is the beneficiary of an annuity or pension. An annuitant can be the contract holder or another person. Proceeds of the annuity contract are provided to the beneficiary upon the annuitant's death to shield the beneficiary from a loss of income.

BREAKING DOWN 'Annuitant'

An annuitant is one or more individuals, or a special class of government employee who receives periodic payments for life or during a specified period of an annuity contract. The owner can name one or more annuitants. Some contracts allow the owner to name joint annuitants. An annuitant must be a natural person and cannot be a company or a trust.

The annuitant is the person whose life expectancy and age are used to calculate the annuity payments. For example, if the owner is 65 years old, but the annuitant is his 60-year-old wife, then the insurance company assumes that it must make monthly payments to her for approximately 24 years, which is the life expectancy of a 60-year-old woman. For a married couple, an annuitant is usually the spouse of the annuity owner.

The Role of Annuitants

People can buy annuities for themselves, which designates them as annuitants. They can also be purchased on behalf of other people, such as relatives, friends or employees. An annuitant may also share benefits, such as when a couple purchases an annuity jointly and designate each other as annuitants when the other spouse dies.

They receive a specified amount of money every month as defined in the annuity contract. After annuity payouts begin, if the owner passes away and the annuitant is still living, the beneficiary receives the payments, the premiums paid plus any interest earned. If an annuitant dies during the annuity accumulation period, the beneficiary receives the cash value of the annuity or the total premiums paid whichever is greater.

The owner makes the selections regarding the annuity, such as the amount of money to invest and how the money should be allocated. The owner also designates the beneficiaries. Some annuity companies require the annuitant and the owner to be the same individual. However, most companies specify that the annuitant and the beneficiary cannot be the same person unless the annuitant and the owner are separate people. The annuitant also has the power to transfer ownership of the annuity to another person. The annuitant and the owner can be each other's beneficiary.

Taxation of Annuitants

Usually, the owner is taxed on annuity payments. If the annuitant and the owner are the same person, the person is taxed. In addition, some contracts state that the annuitant becomes the owner of the contract after the annuity commencement date. In this instance, the owner is liable for any tax on the income-taxable portion of the annuity payments. If an annuitant receives a distribution before age 59 ½, a 10% tax penalty is applied.

RELATED TERMS
  1. Contingent Annuitant

    A contingent annuitant is someone designated by an annuitant ...
  2. Certain And Continuous

    Certain and continuous is a type of annuity that guarantees a ...
  3. Payout Phase

    The payout phase is the phase in an annuity during which payments ...
  4. Period Certain

    Period certain is a life annuity option that allows the customer ...
  5. Annuity Certain

    Annuity certain refers to an annuity contract that provides a ...
  6. Annuity Contract

    An annuity contract is a written agreement between an insurance ...
Related Articles
  1. Investing

    Is Annuitization Your Best Strategy?

    Annuitization offers annuity owners an income stream they can't outlive, but there are pitfalls.
  2. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  3. Retirement

    Personal Pensions: Repackaging The Annuity

    Discover an investment that can provide a stable income once you've left the work force.
  4. Financial Advisor

    Don't Fall for Annuity Salespeople's Fearmongering

    Market volatility brings out the scare tactic-filled sales pitches from annuity salespeople. Investors need to be leery.
  5. Investing

    An Overview of Annuities

    Annuities provide a guaranteed income stream. Learn how they work and their benefits.
  6. Financial Advisor

    Top Annuity Tax Deferral Strategies

    Annuities can provide tremendous tax advantages for retirement savers. Here are some tax deferral strategies to consider.
  7. Financial Advisor

    Annuities: The Good, Bad and the Ugly

    Annuities suffer from a few perception problems. This primer that covers the good, the bad and the ugly of annuities.
  8. Retirement

    Guaranteed Retirement Income in Any Market

    By laddering annuities, you can be sure you'll have income no matter what the market does.
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center