An annuity beneficiary is the person, trust, or organization designated to receive the contract's death benefit when the owner or annuitant dies, often a spouse, child, or charity, with options like lump sums or stretched payouts over time, but spouses usually get more flexibility to continue payments, all subject to tax rules depending on the annuity type (qualified vs. non-qualified).
This quick guide to annuity beneficiaries will help you set annuity beneficiaries the right way, understand contract mechanics, and avoid common pitfalls that derail legacy goals.Why Beneficiary Designations Matter
Beneficiaries determine who receives remaining value or ongoing payments at death. Proper designations help ensure funds pass as intended and avoid delays.
Owner-Driven vs Annuitant-Driven Contracts
Learn the difference and why it matters for death benefits and payout continuation: Owner-driven vs annuitant-driven.
Primary vs Contingent, Per Stirpes vs Per Capita
- Primary beneficiaries receive proceeds first.
- Contingent beneficiaries receive proceeds if primaries predecease or disclaim.
- Per stirpes vs per capita: directs how shares pass to descendants.
Updating and Coordinating with Retirement Accounts
Review designations annually and after life events. For qualified funds and inherited account rules, see Who can stretch an inherited IRA? and Secure Act 2.0 summary.
Common Pitfalls
- Outdated beneficiaries after marriage/divorce.
- No contingent beneficiaries listed.
- Conflicts with trust or will language.
Frequently Asked Questions
Can I name a trust as beneficiary?
Yes, many contracts allow trust beneficiaries. Ensure the trust aligns with your goals and consult your advisor. See Transferring an annuity to a trust.
What’s the difference between per stirpes and per capita?
Per stirpes passes a deceased beneficiary’s share to their descendants. Per capita redistributes shares among surviving beneficiaries at the same generational level.
Do beneficiary rules change for qualified annuities?
Yes. Qualified funds follow IRA and plan rules (including the 10-year rule under SECURE Act). See Who can stretch an inherited IRA? and Secure Act 2.0 summary.
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