What Is a Joint Life With Last Survivor Annuity?

A joint life with last survivor annuity is an insurance product that provides an income for life to both partners in a marriage.

It also can allow for payments 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 Annuities

A joint life with last survivor annuity is by definition not term certain. Payments continue until both partners in a marriage die. Typically, after one partner dies the survivor receives a smaller payment. The exact amounts to be paid are specified in the contract.

It is also possible for an annuitant to designate a beneficiary, who may or may not be the same person as the designated third party. That third party would receive a payment that is triggered by the death of one of the spouses.

For example, a couple might have a joint life with last survivor annuity that pays a $2,000 monthly benefit. After one spouse dies, half of that $2,000 may be reallocated to a third-party beneficiary, such as a child, for the life of the remaining spouse.

As such, a joint life with last survivor annuity may be used as a component of estate planning.

Suitability Considerations

A joint life with last survivor annuity is for married 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 financially.

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 above 50%.

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.