Do Annuities Have Beneficiaries?

Posted Apr 18, 2022

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Listing a beneficiary to your assets means providing a contingency plan in case something happens to you. Listing beneficiaries keep your assets out of probate court and makes passing an asset on to specific individuals a fairly frictionless process. 

But do annuities allow you to list beneficiaries? If so, how many can you list?

What Is an Annuity?

Let’s do a quick overview of what an annuity is. Annuities are contracts issued by insurance companies. They are meant to protect retirement savings of those who wish to receive a guaranteed income stream. Tax deferral is another reason people choose annuities.

Saying an annuity is “guaranteed” income is a stretch. Unlike savings accounts or CDs, annuities are not FDIC insured. The reliability of an annuity is dependent on the credit rating and quality of the insurance company that’s issuing the annuity.

Some annuities offer tax-deferral benefits. This route appeals to those who have maxed out other retirement savings options.

As an insurance product, annuities charge high commissions/fees. If you are considering an annuity, it’s best to work with your financial and tax advisors on choosing the right annuity and if they are even a fit for your situation.

Can an Annuity Have a Beneficiary?

Yes — an annuity can have a beneficiary. Similar to a retirement account or a life insurance policy, a beneficiary can be listed on an annuity. If the annuity owner passes, the annuity will be taken over by the beneficiary. This allows the beneficiary to receive the annuity’s income stream or death benefit (assuming there is one).

For those who are married, it’s common to put a spouse as the primary beneficiary. This means 100% of the annuity will go to the primary beneficiary.

By listing a beneficiary, if the annuity owner passes, the annuity doesn’t go through probate court. Probate court can be a long, drawn-out process and a burden on surviving family members.

Annuities can have surrender charges if they are being terminated before the agreed-upon contract terms. Upon passing of the owner, the beneficiary generally does not have to pay surrender charges.

How Many Beneficiaries Can an Annuity Have

In the previous section, we discussed listing a primary beneficiary. But what if you want to list an alternate in the case that something happens to your primary beneficiary? Or, maybe you want to list a hierarchy of beneficiaries or even divide the annuity across several people. Is any of that possible?

Yes, that is all possible. In fact, you can list as many beneficiaries as you want. You might start with a spouse as the primary, a child as the secondary, and a grandchild as the tertiary. You can keep going by listing a charity as number four and a trust as number five.

Also, if you have four beneficiaries listed, you can allocate percentage-based ownership to each of them. For example, maybe everyone gets 25% or some other combination.

Beneficiaries aren’t limited to individuals such as family members. If the person has a social security number, they are probably a valid beneficiary. Entities such as charities and trusts are valid as well.

You aren’t locked into the beneficiaries that you listed initially. The annuity owner can change beneficiaries at any time and with little effort.

As with most assets that allow it, it’s usually best to list at least one beneficiary. Choosing an annuity can be complex. As mentioned above, your financial advisor and tax advisor can help with this process.


This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Examples shown are hypothetical and for illustrative purposes only.

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