5630 Annuities

An annuity is a contract or device which conveys a right to receive a fixed, periodic source of income for a specified period of time. The person who receives the payments is commonly known as the annuitant. The commercial entity distributing the payment is called the carrier.

There are two phases to an annuity. The first is the accumulation phase, where the annuity is building value. Annuities accumulate value through a lump sum payment or multiple payments. Once the annuity has matured, it is annuitized. This is the pay out phase where regular payments are made from the annuity.

Two settlement options are most common. An immediate annuity is generally annuitized within a year of purchase and is generally purchased with a lump sum. A deferred annuity starts payments at some future age of the annuity. These are generally funded through periodic deposits.

NOTE : All annuities must be evaluated to determine if a transfer of property penalty is applicable, as per 5720 .