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What is a Reversionary Annuity? A Comprehensive Legal Overview
Definition & Meaning
A reversionary annuity is a type of life insurance policy that provides an annuity payment to a designated beneficiary after the death of the insured individual. The payments begin only if the beneficiary, known as the annuitant, is still alive at the time of the insured's death. This financial product ensures that the beneficiary receives a steady income stream following the loss of the insured, providing financial security during a challenging time.
Table of content
Legal Use & context
Reversionary annuities are primarily used in the realm of estate planning and insurance law. They are relevant in situations involving:
Life insurance policies
Financial planning for beneficiaries
Trust and estate management
Users can manage aspects of reversionary annuities through legal forms and templates, allowing them to set up these policies or make changes as needed.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: John purchases a reversionary annuity for his partner, Sarah. Upon John's death, if Sarah is still alive, she will receive monthly payments from the annuity.
Example 2: (hypothetical example) A reversionary annuity is set up for a child named Alex, who will receive payments after the death of their parent, provided Alex is alive at that time.
State-by-state differences
Examples of state differences (not exhaustive):
State
Key Differences
California
Specific regulations on beneficiary designations.
New York
Unique tax implications for reversionary annuities.
Texas
Different rules regarding the payout structure.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Survivorship Annuity
Annuity that pays out to a survivor after the death of the insured.
Typically involves multiple beneficiaries.
Immediate Annuity
Annuity that begins payments immediately after purchase.
Does not depend on the death of an insured individual.
Common misunderstandings
What to do if this term applies to you
If you are considering a reversionary annuity, it is important to:
Consult with a financial advisor or legal professional to understand the implications.
Review your current life insurance policies to see if they meet your needs.
Explore US Legal Forms for templates that can help you set up or modify a reversionary annuity.
For complex situations, seeking professional legal assistance is advisable.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.
Potential penalties: May apply for early withdrawal or policy changes.
Key takeaways
Frequently asked questions
A reversionary annuity is a life insurance policy that pays an annuity to a beneficiary after the insured's death, provided the beneficiary is alive.
The beneficiary can be any individual designated in the policy, such as a family member or partner.
A regular annuity typically starts paying out immediately or after a set period, while a reversionary annuity begins payments only after the insured's death.