Annuity Beneficiaries: How To Provide For Your Loved Ones
One of the great benefits of an annuity is that it can bypass the potentially long and complicated probate process. While this can be a huge benefit to your heirs, you need to make sure you set up your beneficiaries correctly, so that your wishes are fulfilled in the event of your passing. This article will break down common beneficiary terms to help you understand how your annuity’s beneficiaries could work.
What is a beneficiary?
Let’s get the basics out of the way first. A beneficiary is the person or people who will receive the death benefits of your annuity in the event of your passing. In order to have beneficiaries on an annuity policy, your annuity must have death benefits to pass on. Annuities with beneficiaries include:
- Multi-Year Guarantee Annuities
- Fixed Index Annuities
- Secondary Market Annuities
- Immediate Annuities with cash refunds, installment refunds, a years certain payout options
- Deferred Income Annuities with cash refunds, installment refunds, a years certain payout options
Certain payout options, like life only payouts do not have death benefits, and therefore there are no beneficiaries to these policies.
What is the difference between a primary and contingent beneficiary?
The primary beneficiary is the person that receives the death benefit from your annuity in the event you pass away. You can have more than one primary beneficiary.
Your contingent beneficiary is the person who receives your annuity’s death benefit if your primary beneficiary passes away before you do. Think of this as the second person (or people) in line to receive the death benefit.
Do all my beneficiaries get an equal amount?
Not necessarily. Most insurance companies allow you to designate percentage shares of the death benefit. You can make sure that all your beneficiaries get equal amounts or distribute their shares according to your wishes. Death benefit shares are normally designated up at your discretion.
Do my beneficiaries have to be people?
No! You can designate non-natural entities as your beneficiaries if you choose to do so. People often have trusts or charities be their beneficiaries instead of a person. In order to do so, you may need to furnish a tax ID or Trust document; however, this is often unnecessary.
I bought two annuities this year and was extremely satisfied with the service from Immediate Annuities.com each time. In short, their staff was courteous, professional, and prompt. I would recommend them to anyone who wants to buy an annuity.
In addition to this, if you would like your annuity death benefits to be included in your last will and testament, you may simply name your estate as the primary beneficiary. This may be easier for you if you are including your annuity benefits in your will, but understand that your annuity death benefits may not bypass probate.
What if I have multiple primary beneficiaries, and one of them dies before I do?
This is where things start to get a little complicated. There are two types of beneficiary designations, per stirpes and per capita, which change how death benefits are distributed in cases like this. However, the interpretation of per stirpes and per capita depends on how your state interprets these clauses.
We would recommend that you reach out to an estate lawyer for information on how per stirpes or per capita beneficiary designations could play out for you. You can read about the basic differences here and here for more information as well.
How should you set up your beneficiaries?
While the mechanic for setting up beneficiaries is quite easy, it's just a form you complete on your annuity application, your beneficiary structure is an important detail you don't want skim over.
If you have any questions about beneficiary designations, either contact an expert in estate law or simply designate your estate as your primary beneficiary (though this will not bypass probate).
If you need help understanding annuities, please feel free to call our U.S.-based annuity experts at (866) 866-1999. We’re happy to help you set up your annuity so that it serves both you and your loved ones.
Can I change my beneficiaries?
In most cases, the answer to this is yes. However, if your beneficiaries are initially set up to be irrevocable, this means that they cannot be changed after the contract is initiated.
What is the difference between a primary and contingent beneficiary?
A primary beneficiary is the first in line to receive the death benefits. Contingent beneficiaries only receive the benefit if all your primary beneficiaries pass away before you do.
Do I have to designate beneficiaries in my annuity contract?
If your annuity has a death benefit, then yes you will have to set up at least one beneficiary in your contract. However, you can make this beneficiary your estate which will allow your annuity death benefits to be handled by your last will and testament.
Do beneficiaries go through the probate process?
Generally speaking, the answer to this is no. Most life insurance policies can avoid the probate process by the beneficiary designations within the policy. There are, however, exceptions to this, such as setting your estate as the sole beneficiary of your annuity policy.
Can I make a charity my beneficiary?
Yes, you can make a charity or trust your beneficiary. Some insurance companies may require information about the charity or trust, but most insurers will allow non-natural beneficiaries.
References:
- “Understanding Your Options as the Beneficiary of an Annuity” Pacific Life. Retrieved October 6, 2025
- Bisco, J., Gradisher, S., and Wang, J. “Life Insurance Beneficiaries – Per Capita vs. Per Stirpes: Is It Really That Clear?” Journal of Insurance Regulation.
- “What is a contingent beneficiary?” Fidelity Smart Money.
- “Per Stirpes vs Per Capita: What Do These Mean in a Will?” The Laiderman Law Firm, P.C. April 1, 2025
