Annuity Death Benefits If

by Guest » Sat Oct 30, 2010 10:32 pm
Guest

My father took over an annuity that was annuitized from my mother who passed away over a year ago. On the original annuity contract my brothers and I were named as contingent beneficiaries. My father passed away a month ago. Now Baltimore Life says that contract is void after the policy was annuitized, but I cannot find any documentation of any new agreement and my father always filed everything. I cannot believe the original contract is not valid. Am I wrong?

Total Comments: 4

Posted: Sun Oct 31, 2010 03:47 am Post Subject:

Yes, you are probably wrong.

There are several ways to annuitize an annuity contract. It sounds as if your "mother's policy" was actually a joint and survivor annuity. She may have been the owner, and your father the beneficiary, and you and your brothers the contingent beneficiaries. Fine and dandy. It only means something before the annuity is annuitized. Your mother and father were likely "Joint Annuitants".

But when the contract is annuitized, if a "joint and survivor" option has been chosen, then the listed annuitants are the only ones who will receive benefits from the contract. Money to both while both are alive, and money to the survivor until that person dies (often with a reduction in the payment to the surviving annuitant). When the last survivor dies, the payments end.

If the annuity had been a "Joint Life" annuity, the payments would have ended with your mother's death.

Only if the payment option selected was another of the available minimum guarantee or refund options would there be any money payable following the death of your father.

You can send me a PM with your email address and I can send you a handout on annuities that I give my students. It offers a more complete explanation of this.

Posted: Mon Nov 01, 2010 02:28 am Post Subject:

There's actually a lot of things that could have been going on in this situation, but no matter what the end result it likely that the insurance company's answer is correct.

There's two things that I could see being the situation here:

Either the annuitization option chosen was joint life meaning the guaranteed income stream would be paid as long as one of your parents were still alive.

or

If this was an older contract it could have been the case that your dad was the annuitant (on an annuitant driven contract) and the income stream was based on his life (this is an annuity trick used to increase payout by using dad's mortality for annuitization since he's probably expected to die first with a cash refund in case he died really early so mom wasn't completely screwed, but if there is no more benefit to be paid out either the contract had paid out more than it was worth at annuitization, or this option wasn't used). This would have allowed ownership to pass to him and the income stream to continue upon mom's death because the annuitant was still alive (this used to matter with annuities, rare that it does on new contract issued today).

To be clear about something very important. Death benefits on annuities are only paid when the contract isn't annuitized. Annuitization has different rules stipulated when that option is taken to handle remaining money after the annuitant (or owner sometimes it's different and matters) dies. Being contingent beneficiary you'd receive money if the contract hadn't been annuitized and mom and dad died.

Posted: Tue Nov 02, 2010 09:28 am Post Subject:

It's very important to know the right way of handling the money after the annuitant dies. You said that there are some rules regarding annuitization. Can you explain a few of them over here?

Posted: Wed Nov 03, 2010 01:04 am Post Subject:

Annuitization comes with several options.

Single Life Payout: means the income stream will be based off the current account balance and the mortality for the single life annuitant, payment stops at the death of the annuitant

Joint Life: means income stream will be based off current account balance and mortality of the joint lives of two annuitants. Can be done as a full benefit to both annuitants, or as a percentage of the original benefit to the surviving annuitant. Payments stop at the death of the second (surviving) annuitant.

Period Certain: means payout will be determined by current account balance and and the specified period requested for payout

with refund: means account balance will be refunded if not paid out during annuitization at annuitant's death can be done either as a lump sum, or as an installment payout.

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