Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which of the following statements about the parties to an annuity contract is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In an annuity, the owner controls the contract and may be a natural person, a trust, or a business entity such as a corporation. The annuitant, however, must be a natural person because annuity payments are measured by a human life. The owner need not be the annuitant; for example, an employer may own a deferred annuity contract on which an executive is the annuitant, or a trust may own an annuity on a grantor's life. This flexibility is what allows annuities to be used as business and estate funding vehicles.
Why the other options are wrong
- B) Payments are measured by a human life, so the annuitant must be a natural person; it is the owner, not the annuitant, who may be an entity.
- C) The owner and annuitant may be different individuals; the owner has the power to designate who the annuitant will be.
- D) Beneficiaries may be individuals or entities and can generally be changed by the owner unless the designation is irrevocable.
Memory hook
Owner = the wallet (anyone, even a company); annuitant = the heartbeat (must be a real person).