14 Dec My aunt has an annuity. What happens to the money if she dies?

Q. My aunt is 80 and she has an annuity. She paid $100,000 for it and she gets a monthly check. I don’t know how much. If she dies, what happens to the rest of the money?
— Loving niece

A. Annuities can be very complicated products.

The correct answer depends on the type of annuity that your aunt purchased and the terms that were laid out when she purchased the annuity, specifically the structure of the payout options and the death benefit terms.

With some annuities, the payments end at the death of the original annuitant, said Marnie Hards, a certified financial planner with Aznar Financial Advisors in Morris Plains.

Other annuities provide payments for the surviving spouse or other beneficiary after the original annuitant passes away, she said.

Your aunt would have made that decision when she originally purchased the annuity, Hards said.

“If your aunt purchased a period certain annuity, the annuity is guaranteed to be paid out for a specific number of years,” Hards said. “So if she purchased a period certain annuity and passes away before the end of the term of years, the contract likely guarantees payments to her beneficiary for at least the balance of those years.:”

It would be different if she purchased a life annuity.

This type of annuity typically pays out for the lifetime of the annuitant and would stop at her death unless she elected otherwise in the contract, Hards said.

“If your aunt’s annuity included a death benefit provision, she would be permitted to designate a beneficiary to receive the greater of the remaining money in the annuity or a guaranteed minimum,” she said. “After the annuitant dies, the insurance company will distribute the remaining payments to the beneficiary or beneficiaries in a lump sum or a stream of payments.”

We’re not sure if you’re asking because you are your aunt’s beneficiary for other assets. But you will have to speak to her, and see if she will allow you to see the annuity contract, to know what, if any, future inheritance you could expect.

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This story was originally published on Dec. 13, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.