An individual who is legally entitled to receive the periodic payments promised by an annuity investment or a pension is known as an annuitant. The annuitant cannot be a trust or a company and must only be a person. A person holding the contract, a living spouse or a legal beneficiary can be an annuitant.

Annuity payments can be made to a living or surviving spouse or to one or more beneficiaries. Periodic amounts to be paid are determined based on the contract owner’s current age and life expectancy and the age and life expectancies of the beneficiaries of the contract.

Annuity investments offer payouts either at proposed intervals or at the happening of a conditional event. The person who collects the payout is called an annuitant.

Normally, an annuity is meant to supplement the income of the contract holder after retirement. They are usually connected with the person’s pension plan. An annuity could also be a life insurance policy in which the beneficiary stands to benefit from a payout in case the contract holder dies. The amounts of the payments to be made are decided based on the sums that are invested and on the life expectancy of the annuitant. 

Understanding annuitant 

An annuity normally refers to a sum of money that is paid periodically as guaranteed income for life for a pre-decided number of years. A person who is entitled to collect these payments is called an annuitant. This person could be an investor who has paid money to an insurance company in return for a periodic supplement income for the rest of their retirement or a retired employee who is liable to get pension income. 

If the annuitant so wishes, they can arrange for the payments to be made to a beneficiary such as a living spouse as well. Additionally, the person who owns the annuity can name one or multiple annuitants, or even set up a joint annuity based on the terms of the annuity contract. 

The amounts to be paid out periodically are determined based on these criteria – the contract owner’s current age and life expectancy, and the age and life expectancies of the beneficiaries of the contract. Another variation of the annuity is one in which the term is for “life-plus”. In such an arrangement, the payments will be made during the lifetime of the annuitant and will then be transferred to their living spouse for a particular period. 

There are many types of annuities but all of them essentially combine into two major ones: 

Immediate annuity: In this option, the annuitant has to pay a lump sum amount of money upfront. The annuity will then make payments starting right away and lasting for the lifetime of the annuitant. 

Deferred annuity: In this variant, the annuitant deposits regular amounts of money for a specific period. The annuity will start making payments in return at some point in the future. This variant is normally used to serve as supplemental income during retirement. Most companies structure their retirement and pension plans this way. 

Are annuitants taxed? 

Yes, they are. Annuities are considered to be just like normal income and are, therefore, taxed accordingly. However, only the gain received by the annuitant is taxed and not the entire amount. If the person is getting this in the form of a pension, then, the entire annuity is taxed as regular income. 


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