What Is a Joint Life With Last Survivor Annuity?

A joint life with last survivor annuity is an insurance product that provides each spouse or partner with income payments until they both pass away. It also allows for payments to be made to a designated third party or beneficiary even after the death of one of the spouses or partners. Aside from providing an income that cannot be outlived — essentially longevity insurance — it also may be used as a way to leave a financial legacy to a beneficiary or a charitable cause. A joint life with last survivor annuity may also be referred to as a "joint and survivor annuity."

Understanding Joint Life With Last Survivor Annuity

A joint life with last survivor annuity acts as a life annuity in that it is not term certain. It continues paying out to the annuitant and spouse or partner until both individuals die. Once one partner or spouse dies, the payment made to the surviving individual tends to be smaller than the payment made to the couple while they're both alive. The annuitant may also designate a beneficiary, who can be, but does not have to be, the same person as the designated third party. That third party may receive a payment that is triggered by the death of one of the spouses/partners. For example, a couple has a joint life with last survivor annuity that pays a $2,000 monthly benefit. Once one spouse dies, half of that $2,000 may be reallocated to a third-party beneficiary, such as a child or loved one, or estate/heir, until the surviving spouse/partner dies. As such, a joint life with last survivor annuity may be used as a part of estate planning along with retirement income planning.

Who Do They Suit?

A joint life with last survivor annuity is for married or partnered couples who want a surviving party to continue receiving benefits until the death of both individuals. Annuity buyers, in this case, will need to decide how much the surviving spouse will need to receive in income payments from the annuity. Common options provide for payouts at 100% of the original benefit, 75%, 66 2/3%, or 50%. Since a surviving spouse's living costs tend to be higher than half the living costs of two people, many financial advisors and planners choose an income payment somewhere above 50%, though it should be noted that lower payments generally mean a higher death benefit. Of course, if there are other sources of income in retirement, a 50% payout may be adequate.