How Do Annuities Avoid Probate?

By Lee Roberts

Annuities are investment vehicles offered by insurance companies. With annuities, you can provide income for yourself during your retirement as well as for a beneficiary after your death. The typical annuity account will not go to probate because it has a named beneficiary. Assets with a named beneficiary, such as annuities and life insurance policies, typically bypass probate. The beneficiary receives the asset directly.


When you set up an annuity, you typically designate a person to serve as the beneficiary of the account. In the event of your death, the beneficiary will receive the remaining value of the account. The type and amount of funds will vary according to the type of annuity. To avoid probate, the beneficiary must be alive at the time of your death. If your beneficiary dies before you, you must name another beneficiary in order for the annuity to avoid probate.

Death During Accumulation Period

Annuities typically have an accumulation period during which you add funds to the annuity. For example, during your working years you might direct a certain amount each month to your annuity. If you die during the accumulation period, the annuity guarantees to pay a certain sum directly to the designated beneficiary, bypassing probate.

Protect your loved ones. Start My Estate Plan

Death During Payout Period

Annuities have a period where the investor receives a lump sum or scheduled payments from the insurance company -- often you might choose payments to begin once you retire. If you die during the payout period, the insurance company will pay the your designated beneficiary. Depending on the terms of your annuity, the beneficiary may receive a limited number of payments or payments for his lifetime, but either way, this asset bypasses probate.

Method to Designate the Beneficiary

The specific method of naming a beneficiary depends on the forms provided by the company selling the annuity. It's typically as simple as writing the name of your beneficiary on the forms in a designated place. If there is any problem with the paperwork, and you have managed not to name a beneficiary -- a very unlikely occurrence -- the annuity will go to probate.

Protect your loved ones. Start My Estate Plan
Items That Are Not Part of a Probate Estate in Pennsylvania



Related articles

How to Retitle an IRA When a Successor Beneficiary Inherits the IRA

If you inherit an IRA from your spouse, you can roll it over to a new IRA in your name or merge it with your own existing IRA. Unlike non-spouse beneficiaries, you can keep contributing to it. Everyone has the option to cash out an inherited IRA in a lump sum; however, this could result in a large tax bill. Generally, the IRS permits beneficiaries to withdraw the balance of the account in required minimum distributions each year based on the beneficiary's age or withdraw the entire amount within five years. Whatever you decide to do with your inherited IRA, unless you’ve inherited it from a spouse, you must re-title it. This ensures that the tax-reporting forms for future distributions are appropriately titled.

Dying Without a Will & the Beneficiaries of an Annuity

Wills and annuities are popular tools for estate planning as both can be used to distribute property to beneficiaries after a person dies. Wills distribute probate property to identified beneficiaries. Annuities are contracts that allow a person to pay a third party, which then pays a series of annual payments to beneficiaries for a set period of time. Since both wills and annuities deal with property distributions after a person’s death, a common question is whether the lack of a will would affect the beneficiaries of an annuity set up by the decedent.

Should a 401(k) Be Put Into a Living Trust?

A living trust can be an important part of an estate plan, allowing assets to pass directly to named beneficiaries without having to go through a court-administered probate process. Many assets can be included in the trust, such as real estate, vehicles and bank accounts. But 401(k)s, IRAs and some other retirement accounts cannot be placed in a trust.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

The Advantages of Changing a Bank Account Title to a Living Trust

A living trust, which is created during the grantor's lifetime, is an estate planning tool used as a holding area for ...

What Is the Law for Beneficiary Designation for Bank Accounts?

Planning for distribution of your assets after your death can be a complex and confusing process. Naming beneficiaries ...

Do IRAs Override a Last Will & Testament?

The beneficiary form you complete when you open an IRA is like a “mini-will” for your retirement account. Because your ...

Can I Put Jointly Held Property in a Living Trust?

Generally, you place assets into a living trust for your management, use and benefit during your lifetime, with those ...

Browse by category
Ready to Begin? GET STARTED