Category: 

What is an Annuity Certain?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 03 February 2020
  • Copyright Protected:
    2003-2020
    Conjecture Corporation
  • Print this Article

An annuity certain is a type of agreement or contract that is structured to provide a series of payments to a recipient for a specific period of time. This type of arrangement may be created to handle the disbursement of annuities from a retirement fund, a trust fund, or any other situation where the income from a capital investment is paid out according to a structured payment plan. An annuity certain can also be structured as a lump sum payment that is scheduled for payment by a specific date in the future, as well as be set to be paid in a series of scheduled payments.

While there are exceptions, it is not unusual for an annuity certain to be arranged so that regularly scheduled payments are disbursed over a period of ten years. Often, the process involves the issuance of monthly payments to the recipient. Depending on the structure of the fund that is disbursing the payments, the amount of each payment may be uniform, or vary somewhat from one period to the next. There are also situations where the disbursements are set up on a quarterly or semi-annual basis, according to the terms and conditions established at the time of the creation of the fund.

Ad

In many situations, an annuity certain is structured to allow for the possibility of the recipient dying before all payments have been disbursed. In the event of death, the payments may be forwarded to the estate of the deceased, or remitted to an individual or organization previously designated by the recipient. Should the recipient fail to make some sort of alternative plans for the payments prior to his or her death, laws that prevail in the area will apply. It is not unusual for the legal spouse or partner of the deceased to become the recipient of the payments. When no legal spouse or partner exists, the payments may be redirected to the next of kin.

The establishment of an annuity certain is an excellent way to provide for the future financial security of a recipient. Assuming the income is disbursed at regular intervals over a period of time, it is possible to ensure the individual can enjoy an equitable quality of life, and look forward to some sort of regular income, even if he or she is currently unemployed for any reason. This model is sometimes used as a way of providing for a surviving spouse and any children the couple have, in the event that one of the spouses should suddenly die. Funds structured with this approach may also include provisions to forward the payments to one or more of the children once both parents are deceased. With this approach, it is possible to not only create a steady stream of income for personal use, but also provide financial support for loved ones when the recipient is no longer around to enjoy the income stream.

Ad

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email