What happens to income after death?

11th January 2012

When it comes to annuities they are designed to operate over the lifespan of annuitant – to provide them with a stable income for the remainder of their life. So the question often remains, what happens to this income after they die? When it comes to annuity income this question can only be answered by looking at the type of annuity that has been taken out and what might have been put in place to ensure an income for a surviving partner or next of kin.

Joint life annuities

One of the most popular ways of protecting a partner over death is through a joint life annuity. This type of annuity generally covers a couple and ensures that an annuity income is paid right through until the death of both partners. This means that if one partner were to die prematurely, the annuity income would still be paid to the surviving partner and therefore they would not be left out of pocket.

These annuities are a popular choice for people who like the peace of mind that their partner will not be left financially out of pocket as the result of an unexpected death.

Single life annuities

Single life annuities are an independent option and involve only the annuitant and their personal circumstances. In some cases single life annuity incomes are generally higher because they only have to take into consideration the personal circumstances of one person rather than two. Unfortunately upon death there are no benefits which are left to a surviving partner or next of kin through this type of annuity unless a death benefit has been built into it.

Other options for consideration

There are a range of death benefit options which can be built into annuity plans to help cover any partners or relatives in the event of an early and unexpected death some of these options include:

  • Annuity Guarantee Period – the annuity guarantee period ensures that the annuity is paid out for a minimum amount of time, even in the event of the death of the annuitant – the remaining funds would  be paid to the beneficiary
  • Value Protection – this can be used in the event that an annuitant dies before the age of 75. Any remaining annuity income could be paid to the remaining beneficiary, but this income will be subjected to tax.
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