What to Know About Jointly Owned Annuities: EDU #2626

Chris's Summary
Jim and I continue our discussion on annuity insurer failures and state guarantee fund protections before turning to jointly owned annuities, examining how they differ from other jointly titled assets. We cover credited versus uncredited interest, mortality table calculations for annuitized contracts, and how a jointly owned annuity's death benefit passes to named beneficiaries rather than the surviving owner. Contract language varies by insurer on how the surviving joint owner is treated relative to named beneficiaries.

Jim's "Pithy" Summary
Chris and I pick up where we left off last week and close out our take on that NBC article about a woman whose annuity insurer ran into serious financial trouble. I get into the timing behind a related lawsuit, why I think the agent involved should have caught the warning signs, and why the insurance company itself deserves plenty of blame too. We also break down how state guarantee funds actually work once an insurer goes under, the difference between credited and uncredited interest, and what changes once you've annuitized and the fund has to figure out your payments using its own mortality tables.

Then we shift into jointly owned annuities, and this is the part worth paying close attention to. Most people assume a joint annuity behaves like any other jointly titled asset, where the survivor automatically ends up owning the whole thing. However, that is not always how it works. I walk through language from two different insurance contracts we have dealt with over the years, and the two companies handle a joint owner's death in completely different ways. If you have an older jointly owned annuity with someone other than your spouse listed as primary beneficiary, this is worth looking into now, because what actually happens at the first owner's death might not be what you expect.