7.3 Annuity Structure and Design
Annuities can be used as a vehicle to fund many things, especially when large sums of money are involved and require payments over the period of a lifetime.
An annuity can be structured in a variety of ways to provide for a variety of situations.
- Funding the lottery - The winner wants to take periodic payments rather than a lump sum.
- Upcoming large expenses - The burden of funding a college education can be lessened.
- Lawsuits - The settlement of a lawsuit can be fully funded and made payable to the prevailing party.
Annuities are typically flexible in their design structure.
- The Funding Method provides a single lump sum payment or periodic payments over time.
- The Date Annuity Benefit Payments Begin allows immediate payments or deferred until a future date.
- The Payout Period gives the recipient options of receiving returns for a specified term or for life, or a combination of both.
- The Investment Configuration allows for a fixed (guaranteed) rate of return or a variable (nonguaranteed) rate of return.
Classification of Annuities
