Term certain annuity for a minor child

The term certain annuity provides your clients with a regular guaranteed income for a specified duration. If the annuitant dies before the end of this period, the annuity is paid to its estate.

Advantages

  • Provides a guaranteed income for a specified period of time
  • Makes it possible to spread the taxation of the amount received over the remaining years before the child reaches majority
  • Safe from market fluctuations
  • No management necessary
  • No minimum age to purchase

Options

  • Indexation: to offset the effects of inflation, the annuity can be indexed at an annual percentage rate.

Factors that influence annuity payments

  • Amount paid
  • Date funds are received
  • Date of first payment
  • Payment period
  • Interest rate in effect when the annuity is issued

Source of eligible funds

Source of single premium (unless otherwise indicated, during the annuitant’s lifetime)Annuity guarantee payment periods availableSample calculation
Death benefit from an RRSP, LIRA, locked-in RRSP, RRIF, LIF or RPP received by a child or grandchild who is financially dependent of the deceasedAny period between 1 year and a number of years equal to 18 minus the age* of the annuitant (child).If the annuitant (child) is 14 years of age at the time of purchase, the annuity payment guarantee period may vary between 1 and 4 years. (18 years – 14 years)
Non registered funds belonging to the child and administered by the tutorAny period chosen by the tutorUp until the age of 25

Minimum premium

  • $5,000

Annuity payment

  • The annuity can be paid by direct deposit or cheque
  • The annuity can be paid monthly, quarterly, semi-annually or annually
  • Tax witholding permitted on request
  • Annuities with payments of less than $300/year or $25/month are rejected.

End of annuity payments

  • At the end of the payment duration

Changes

  • No changes are permitted

Surrender

  • The annuity may be surrendered at the commuted value
  • The prescribed annuity is non-redeemable

Taxation

  • Registered annuity: All the payments received are taxable
  • Non-registered annuity
    • Prescribed: taxed at same rate each year
    • Non-prescribed: tax rate decreases throughout the contract