What is an annuitant in an annuity policy?

The annuitant is a central individual in any annuity contract, but they’re not always the person who purchases the annuity. Understanding the distinction between annuitant, owner, and beneficiary will help you make more informed decisions when buying or managing an annuity. 

This article delves into what an annuitant is and the role they play in an annuity contract.

What is an annuitant?

In an annuity policy, an annuitant is the person who is expected to receive annuity payments. Payments can typically continue for as long as the annuitant lives, though some contracts permit payouts to continue for a period of time even after the annuitant’s death. 

These are key points to know about annuitants:

• They must be a natural person: An annuitant cannot be a trust, corporation, or other entity, as payouts are generally based on human life expectancy. 
• Their age, gender, and life expectancy can affect payouts: The annuitant’s demographic information can directly influences the payment schedule. Naming a younger annuitant may result in lower monthly payments but a longer income period, while an older annuitant could produce higher monthly payments over a short period. 
• They may also be the owner: The annuitant can be the same person who owns the annuity, but this isn’t required. 
• They don’t have to provide funds: The annuitant doesn’t have to contribute to the annuity purchase — another individual can fund the contract.

Some annuity contracts, such as joint-and-survivor annuities, allow more than one annuitant. In these cases, the insurance company calculates payouts based on the lives of both, or multiple, annuitants. Payments are generally lower than with a single life annuity because it involves spreading the risk of payment over more than one lifespan. The joint structure can provide added financial security — payments can continue as long as at least one annuitant is alive, which is particularly useful for couples or families seeking long-term income protection. 

Is the annuitant the beneficiary?

The annuitant and beneficiary are not the same. While the annuitant is the individual whose life expectancy can dictate the payouts, the beneficiary is the person (or entity) who inherits the remaining value or death benefit if the annuitant dies and the annuity contract includes survivor benefits or has yet to be annuitized. 

This distinction matters when structuring joint annuity contracts, ensuring spousal coverage, and planning for heirs. Beneficiary designations — such as spouse or trust — also influence how quickly insurance companies distribute the remaining funds. Spouses often have the most flexibility, while non-spouse beneficiaries may face more restrictions. 

In practice, this can affect whether remaining funds are paid out as a lump sum or over time, which can have significant tax implications. With non-qualified annuities, the beneficiary might have to pay taxes on the earnings portion of the death benefit (the principal investment is not taxed). For qualified annuities, distributions are generally taxed as ordinary income regardless of whether the beneficiary is a spouse or not. 

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Annuity owner vs. the annuitant

The annuity owner is the person who purchased the annuity and controls the contract. The annuitant, is the individual whose life expectancy determines payout amount. 

The owner of an annuity can do the following:

• Name one or more annuitants: Generally, they can designate a spouse, parent, or child — or even multiple individuals — as annuitants. The specific eligibility requirements for a joint annuitant depend on the annuity contract.
• Change the beneficiary: The owner can update who will receive any remaining value or death benefit, allowing flexibility for changing family circumstances or estate planning. 
• Surrender the annuity contract: The owner can partially or fully cash out the annuity if needed, although surrender charges may apply. 
• Choose can you payout options: Owners decide the type of annuity distribution and payment frequency. 
• Transfer annuity ownership: They may reassign ownership to another individual, which can support gifting and estate planning, though this may have tax consequences.

In contrast, the annuitant:

• Has no control over the annuity contract (unless they’re also the owner).
• Life expectancy determines when annuity payments start and finish,the amount of the annuity payout 

For example, a grandparent may buy an annuity for a grandchild. The grandparent is the owner, funding the contract and retaining control, while the grandchild is the annuitant, with payments calculated around the grandchild’s life expectancy. Conversely, an adult child might buy an annuity for a parent to ensure guaranteed income in retirement. In this case, the child can serve as the annuity owner but designate the parent as the annuitant, basing the distributions on the parent’s life expectancy. 

Some annuity owners structure contracts with multiple annuitants for more complex planning, such as funding education for multiple children or providing income for both spouses in retirement.

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This article is intended for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. For advice concerning your own situation please contact the appropriate professional.  The GainbridgeⓇ digital platform provides informational and educational resources intended only for self-directed purposes.

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