Consultant

What Happens to My Annuity After I Die?

March 30, 2025

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When you die, your annuity will either end, continue for a specified period for your beneficiary, or continue making payments to the surviving person (if it is a joint annuity), depending on the options you chose when you purchased it.

Key Takeaways

Income annuities have many different payout options, ranging from stopping payments to continuing to pay regardless of whether you’re living or not.
Deferred annuity payments are determined by the type of annuity and the phase you’re in.
If you die during a deferred annuity accumulation phase, your beneficiaries receive the accumulated value.
If you die after the deferred annuity payout phase begins, the type of annuity determines if payments continue or stop.

Types of Annuities

There are two broad categories of annuity:

Income: These are annuities designed to provide income streams for long periods.
Deferred: These annuities are designed to provide different growth options, with lump sum or regular payments in the future.

Income Annuities

There are two types of income annuities:

Immediate Income: Payouts begin within one year of purchase, premium paid in one installment
Deferred Income: Payouts begin at a future date (longer than one year), premium paid in one installment, designed to deliver higher payouts

Immediate and Deferred Income Annuity Payout Options

Income annuities can be purchased with different payout and beneficiary options, which apply to both Single Premium Income Annuities and Deferred Income Annuities:

Life-Only: The insurance company pays out only as long as the owner, called the annuitant, is alive. Once the annuitant dies, the payments stop, no matter how much money is left over.
Period Certain Only: The insurance company makes payouts to a beneficiary for a specific period, whether the annuitant is living or not.
Certain and Life: Similar to the Period Certain Only option. This option makes payments during a specific period, but if the annuitant dies, payments continue to a beneficiary until the period ends.
Installment Refund: Similar to the Certain and Life payout option, this option sets the payout period based on the desired monthly payments and total premium paid. The total is divided by the monthly payments to give the annuitant the payout period, and the payout continues to the beneficiary until the period ends.
Cash Refund: Similar to the Installment Refund option, but if the annuitant dies, a lump sum is given to the beneficiary equaling the leftover amount in the annuity.
Joint and Survivor: This plan provides income for a couple, with payments remaining steady as long as one of them is alive. The couple also has the option to have the annuity payment adjusted to lower amounts if desired.

Deferred Annuities

Deferred annuities do not immediately begin making payments; instead, they wait for a specific time to start. The buyer usually contributes over a period of years, and the contributions grow through interest credited and compounding interest.

There are four types of deferred annuities:

Fixed: The buyer’s contributions grow at a fixed annual interest rate
Fixed indexed: The buyer’s contributions are credited interest based on changes in a stock market index
Variable: Contributions are invested in various equity or bond funds or fixed-interest accounts. Returns will depend on the performance of the funds in which the contributions are invested.
Structured variable: Also called a Registered Index-Linked Annuity (RILA), contributions are invested in various funds, but they generally follow strategies that provide market upside crediting and market downside protection.

Deferred annuities have two distinct phases that affect payout if you die: the accumulation phase and the payout (distribution) phase. The accumulation phase starts when you begin contributing and ends when you receive a lump sum payment or begin receiving a series of payments. If you die in this phase, your beneficiaries will receive the accumulated amount.

Fast Fact

Some annuity contracts include a guaranteed minimum death benefit, which pays a minimum amount to a beneficiary if something happens to the annuitant.

If you die after the payout phase begins, whether the payments continue or not depends on the annuity type you’ve chosen. If it is a Joint and Survivorship (joint income for life) annuity, the spouse or partner continues receiving the benefit. If it is a Life-Only (income for life) annuity, once you die, the payments stop, and the insurance company keeps any leftover funds.

Who Gets the Money In an Annuity When You Die?

It depends on how the annuity is structured. In some annuities, a beneficiary or joint owner keeps receiving payments. In others, the leftover money might be given to a beneficiary or kept by the insurance company.

Do Annuities Pass to Heirs?

It can pass to heirs if it is structured to pass leftover money or payments to a beneficiary. If a family trust is named as the beneficiary and the proper type of annuity was chosen, the trust could distribute the remaining money to heirs. There are many factors that can affect how this might work, so it’s best to speak to a lawyer or advisor familiar with annuities and trusts about your circumstances.

Does an Annuity Ever End?

Annuities are not perpetual, so each type has criteria for ending. Depending on the type, the stopping point could be the annuitant’s or joint owner’s death or the end of a payout period.

The Bottom Line

There are many types of annuities, each with different methods for distributing money or stopping payments after the annuitant(s) die. Before purchasing an annuity, it’s best to do your research and evaluate your circumstances and criteria, then speak to a financial advisor or lawyer about your choices.

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