Annuities left by will

An annuity can be defined as “an insurance contract that guarantees to pay out annual amounts for a fixed term”. This definition is to be found in the glossary of technical terms on Page 49 of the Inland Revenue’s February Consultation document “Modernising Annuities”. That consultation document discusses pension annuities. Like much else in the consultation, the definition of an “annuity” can be criticised, not least because with most annuities, the fixed annual payments are intended to last for the lifetime of an individual which is usually an uncertain, rather than fixed, term. One of the ideas canvassed in the Revenue consultation paper is a suggestion that fixed term annuities might be able to be offered. However, in general, where an annuity is left by Will to a beneficiary the payment will normally be intended to continue throughout the beneficiary’s lifetime.

Certainly, in re Barton deceased ((2002) WEHC 24 (CH)) (noted in “From the Courts” on p.3), the annuity was intended to last for the lifetime of the testator’s son. The problem was that it would not start to become payable until the son had reached the age of 65. In the event, the testator died when the son was only about 51 so, not surprisingly, the son and another beneficiary entered an agreed variation under which the son took a more immediate benefit. The Will in the Barton case was somewhat unusual in the relatively advanced age that the beneficiary would have to attain before he achieved any benefit at all. It would be more normal for an annuity, given by a Will, to commence from the date of the testator’s death.