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 available | Sample calculation |
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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 deceased | Any 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 tutor | Any period chosen by the tutor | Up until the age of 25 |
Minimum premium
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
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
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Prescribed: taxed at same rate each year
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Non-prescribed: tax rate decreases throughout the contract