A growing need for clarity
Living annuities appear frequently when assessing maintenance or accrual in both divorce matters and deceased estates. Yet despite their importance, the valuation of these products has remained conceptually unsettled and often misunderstood.
The limits of current approaches
For years, valuations have relied on market values or multiple drawdown scenarios. But these approaches rarely reflect the product’s legal structure, its economic purpose, or how it is treated for tax. This leaves attorneys, fiduciaries and courts with valuations that are difficult to interpret and often inconsistent.
A reframing around intention and entitlement
Living annuities blur the line between income and inheritance. The capital belongs to the insurer, but the annuitant holds a contractual right to income. This paper reframes valuation by separating what the annuitant is entitled to receive as income from what may remain as a contingent inheritance.
A framework aligned with real-world use
The paper sets out a structured method that focuses on the economic function of the living annuity rather than arbitrary drawdown assumptions or simplified market values. The result is a clearer, more defensible way to interpret these products in maintenance and accrual assessments.
Broader implications beyond living annuities
Although the focus is on living annuities, the underlying principles provide a useful lens for understanding other pre-retirement funds — and support more intentional retirement and advice strategies for professionals working with clients.
