In the context of annuities, what does 'beneficiary' refer to?

In the context of annuities, the term 'beneficiary' specifically refers to the person designated to receive the assets or benefits from the annuity upon the death of the annuitant. This means that the beneficiary is typically someone who would inherit the funds or receive the remaining value of the annuity if the annuitant passes away. It is important to differentiate this from the individuals actively receiving payments from the annuity during their lifetime, which would typically be the annuitant.

Beneficiaries are critical in estate planning, as they ensure that the proceeds are directed to the intended party without going through probate. This designation allows for a more seamless transfer of funds and is a key aspect of managing the financial implications of an annuity. Understanding the distinction between the annuitant, who receives payments, and the beneficiary, who receives benefits after death, is essential for grasping how annuities function in financial planning and wealth management.