Legal Definitions - contingent annuity

A contingent annuity is a financial arrangement where a series of regular payments (an annuity) is made, but only *if* or *when* certain specified conditions or events occur. These conditions must be met before the beneficiary is entitled to receive the payments. Essentially, the start or continuation of the annuity payments is dependent on a future, uncertain event.

• Example 1: Educational Milestone

  A grandparent establishes an annuity for their grandchild, stipulating that the payments will begin only if the grandchild successfully graduates from an accredited four-year university program with a minimum GPA of 3.0 before the age of 26.

  Explanation: This is a contingent annuity because the grandchild's entitlement to receive the payments is entirely dependent on meeting the specific conditions of university graduation and academic performance by a certain age. If these conditions are not met, the annuity payments will not commence.

• Example 2: Business Performance Incentive

  As part of a succession plan, a retiring business owner agrees to receive an annuity from the new owner. However, the annuity payments will only begin if the business maintains a positive net profit for at least two consecutive fiscal years following the transfer of ownership.

  Explanation: Here, the annuity payments are contingent upon the future financial performance of the business. The retiring owner will only receive these payments if the predefined condition of sustained profitability is successfully met over the specified period.

• Example 3: Property Maintenance Agreement

  An individual transfers ownership of a historic family home to a distant relative, with the understanding that the relative will receive an annuity only if they reside in and continuously maintain the property in its original condition for a minimum of fifteen years.

  Explanation: This illustrates a contingent annuity because the relative's right to receive payments is conditional upon fulfilling the specific requirements of residency and property maintenance for a decade and a half. If these conditions are not met, the annuity would not activate.