An annuity is owned by a mother, with her daughter as the annuitant and her son as the beneficiary. Who controls the annuity contract?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The owner of an annuity controls the contract: making premium payments, choosing the payout option, exercising surrender rights, and changing the beneficiary designation. The annuitant is simply the measuring life whose longevity determines how long lifetime income is paid. The beneficiary has rights only after the annuitant's death, and only to the extent the selected payout option leaves unpaid amounts. When the owner and annuitant are different people, contractual control remains exclusively with the owner; the annuitant has no authority over the contract merely because his or her life is the measuring life.
Why the other options are wrong
- B) The annuitant's life is measured, but the annuitant has no contractual control unless he or she is also the owner. Control does not follow the measuring life.
- C) The beneficiary only receives unpaid benefits after the annuitant's death. The beneficiary holds no control over the contract while it is in force.
- D) There is no joint-control arrangement. Ownership rights belong to the owner alone, and neither the annuitant nor the beneficiary shares them.
Memory hook
Owner rules the contract; annuitant only measures it; beneficiary waits.