Joint Life with Last Survivor Annuity: Definition, Benefits, and Considerations
AB
Summary:
What is a joint life with last survivor annuity?
A joint life with last survivor annuity is an insurance product designed to provide a continuous income stream for the lifetime of both partners in a marriage or partnership.
It guarantees that payments will continue as long as one spouse is alive, even after the death of the other spouse. This feature makes it a valuable tool for ensuring financial security throughout retirement.
How does it work?
When a couple purchases a joint life with last survivor annuity, they agree to receive regular payments from the insurer. These payments typically continue until both spouses have passed away.
After the death of one spouse, the surviving spouse continues to receive payments, although the amount may be adjusted. The exact terms and payment amounts are specified in the annuity contract.
What are the benefits?
There are several benefits to choosing a joint life with last survivor annuity:
Income security: Provides a reliable income stream for both spouses throughout their lifetimes.
Financial legacy: Allows for payments to a designated beneficiary, ensuring that loved ones are provided for even after the death of both spouses.
What are the considerations?
Before purchasing a joint life with last survivor annuity, couples should consider the following:
Payout options: Decide on the percentage of the original benefit that the surviving spouse will receive.
Financial needs: Determine the financial needs of the surviving spouse to ensure adequate income.
Death benefit: Consider the impact of lower payments on the death benefit.
Suitability Considerations
A joint life with last survivor annuity is suitable for married couples who want to ensure that the surviving spouse continues to receive benefits until both individuals have passed away.
Buyers should carefully consider the financial needs of the surviving spouse and choose an income payment option that provides adequate support. Lower payments may result in a higher death benefit, but it’s essential to assess the impact on overall financial security.
Frequently asked questions
What happens if both spouses die simultaneously?
If both spouses die simultaneously, the annuity contract typically specifies beneficiaries who would receive the remaining payments. These beneficiaries could be family members, dependents, or designated individuals.
Can the payout percentage be changed after purchasing the annuity?
Once the annuity is purchased, the payout percentage is typically fixed and cannot be changed. However, it’s essential to review the contract terms before purchasing to ensure it aligns with your financial goals and needs.
Are joint life with last survivor annuities taxed?
Yes, the income received from joint life with last survivor annuities is generally subject to taxation. However, the tax treatment may vary depending on factors such as the type of annuity, the source of funds used to purchase it, and applicable tax laws.
Can joint life with last survivor annuities be cancelled?
Most joint life with last survivor annuity contracts come with a surrender period during which cancellation may incur penalties or fees. It’s crucial to carefully review the terms and conditions of the annuity contract before purchasing to understand the cancellation policy.
Is it possible to name multiple beneficiaries?
Yes, some annuity contracts allow the annuitant to name multiple beneficiaries. These beneficiaries would receive the designated payments according to the contract terms upon the death of one or both spouses.
Key takeaways
- A joint life with last survivor annuity provides lifetime income for both partners in a marriage.
- Payment amounts may be adjusted after the death of one spouse, with options to designate beneficiaries.
- Careful consideration of payout options and financial needs is essential when purchasing an annuity.
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