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LSDefine
Simple English definitions for legal terms
tontine
Read a random definition: serjeant-at-arms
A quick definition of tontine:
A tontine is a way for people to invest their money together. They each put some money into a big pot and get paid some money back every year. But, when someone dies, their share of the money goes to the other people still alive in the group. This keeps happening until only a few people are left, and then the tontine ends.
A more thorough explanation:
Definition: Tontine is an investment plan where people buy shares in a common fund and receive a regular payment. The payment increases every time a participant dies. When a participant dies, their share is split between the surviving shareholders in the pool. The investment ends when the number of surviving shareholders reaches a previously agreed on, small number.
Example: Let's say there are 10 people who invest in a tontine. Each person puts in $10,000. They agree that they will receive a payment every year. The payment starts at $1,000 per year and increases by $100 every time someone dies. If one person dies, the payment becomes $1,100 per year. If two people die, the payment becomes $1,200 per year, and so on. When there are only two people left, they split the remaining money.
Explanation: This example shows how a tontine works. The investors put their money into a common fund and receive a regular payment. The payment increases every time someone dies. When there are only two people left, they split the remaining money. This is how a tontine investment comes to an end.