A joint and survivor annuity is a system where two or more people receive structured payments that continue until all members of the collective are dead. This is in contrast to a joint and life annuity, where the structured payments stop upon the death of any participant. These payments are generally the result of a retirement plan or payments from a lawsuit or settlement. Commonly, a joint and survivor annuity pays a portion of the annuity to each participant; when a participant dies, the additional money is gone rather than being redistributed to the remaining members.
Annuities are a common method of planning for retirement. In this case, a person pays money into an account over the course of her time working. This money is held by a third party, often an investment house or brokerage company. The money gains interest while in the account, either through investments made on the worker’s behalf or through high-interest savings packages.
As the money remains in the retirement account, the investment yield will hopefully increase the money to a point where the worker may live the rest of her life off the money and interest. When retirement occurs, the money is paid out in checks similar to paychecks. This allows the retired worker to continue her life in a manner similar to the way she lived before.
The other common annuity source is a payment from a lawsuit, estate settlement or trust account. In these cases, the overall process is the same, but the person reviving the payments didn’t necessarily pay into the system. In this case, the person receives periodic payments based on a predetermined payment schedule.
Joint annuities are the same as standard annuities except they have more than one participant. The most common joint annuities are between family members such as a shared husband-and-wife retirement plan or a trust fund set up for multiple children. These systems still have money paid out in predetermined amounts at predetermined times.
Most joint annuities have one of two cutoff times. Some are based on age or a specific amount of time; this is most common when annuities are paid involuntarily or to children. Other annuities end when the participants die. The common joint and survivor annuity operates until all payees die, whereas the joint and life version works until one dies.
The joint and survivor annuity typically pays an amount to each participant. Each member of the annuity receives a set amount of money at set times. Should one member die, the other members generally do not get the additional money. Even when a husband and wife hold the joint and survivor annuity, the surviving member generally receives a check for her portion alone. While this is true of most contracts, it is not true of all and should be checked beforehand.