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Annuitant-Driven Vs. Owner-Driven Contracts Explained

Owner-Driven Vs. Annuitant Driven Contracts: Magnifying glass on a legal contract

Owner-Driven vs. Annuitant Driven Annuity Contracts

An owner-driven contract terminates upon the death of the owner and the death benefit is paid directly to the designated beneficiary. An annuitant-driven contract terminates upon the death of the annuitant. 

There are two basic types of annuity contracts:

  • owner-driven contracts 

  • annuitant-driven contracts.

Annuities have become a popular choice for investors that want a safe accumulation vehicle to grow and protect their retirement nest egg and also for those retirees looking to add a guaranteed lifetime income stream to their portfolio.  

Possible Parties in an Annuity Contract

There are always at least three parties involved in an annuity contract but there can be up to four when the owner and annuitant are not the same. 

Owner-Driven Contract

If an annuity is an owner-driven contract it terminates upon the death of the owner and the death benefit is paid directly to the designated beneficiary. If the annuitant predeceases the owner of an owner-driven contract the owner can decide to become the annuitant or chose to elect a new annuitant. 

The original terms of the annuity contract remain the same!

Annuitant-Driven Annuity Contracts

An annuitant-driven contract terminates upon the death of the annuitant. The death benefit then passes down to the designated beneficiary. 

It is rarely advisable to have an owner, a different annuitant and a beneficiary in an annuitant driven annuity.

Owner-driven contract and annuitant driven annuity contract explained

Joint Ownership

Joint ownership should only be undertaken when absolutely necessary. Remember, the death of the owner rules require that a distribution of the contract occur upon the death of ANY joint owner.

This means at the death of the first joint owner, the contract, if not in payout status, must be fully payout within 5 years. Designating a spouse as the joint owner does NOT assure that continuation will be permitted unless care is taken to assure that both joint owners are also designated as joint beneficiaries.

It also is problematic if you have joint owners but designate only one as a beneficiary. If that person happens to die and no contingent or joint beneficiary is named, you could well have a situation in which proceeds will have to be paid to the deceased owner’s estate, or worse, interpleaded if the surviving joint owner asserts entitlement to the death benefit.

Joint ownership should only be undertaken when the parties fully understand the potential ramifications of such an ownership designation and the implications of joint ownership in either a common-law or community property context.¹

When the Annuitant and Owner are the Same Person

If you are buying an annuity as part of your own retirement plan you most likely will be the owner and the annuitant. In this scenario it is very simple –  the death benefit will only be paid if you die during the term of the contract.

It is usually good practice for the owner to also be the annuitant but that isn’t always possible.

Annuities are sometimes purchased by a trust or a corporation. This is a situation when the owner and the annuitant must be different as an annuitant cannot be a non-natural entity.

What Happens to My Annuity if I Die?

Annuitant-driven contracts: the annuity will pay a death benefit when the annuitant dies. 

Owner-driven contracts: pay a death benefit only when the owner of the contract dies. If the annuitant dies, the owner simply designates a new annuitant. 

Note: The owner always controls the annuity regardless of either type and the annuitant has no ownership rights of the annuity contract.


When deciding what type of annuity to buy you should always consult your own tax, legal and or financial professional as well as an annuity expert.

It is critical the parties to your annuity contract be set up appropriately (owner, annuitant, beneficiary). It is also important to know if you want an annuity that is an owner-driven contact or annuitant-driven contract.

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Jason Caudill, MBA

Jason Caudill, MBA

Jason is passionate about annuities and the important role they can play inside a retirement portfolio. He's distributed more than $1.5 Billion in annuities over a 17-year career; serving in many roles, including RVP at the largest independent Annuity Brokerage Firm, VP of Marketing at a top Insurance Company, and Regional Director in the Private Client Group at a Fortune 500 Company.

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