Advanced Diploma of Financial Planning (ADFP) Practice Test

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What does a joint and survivor annuity provide?

Payments only to the surviving spouse
Payments based on the lives of two or more annuitants
Only one-time lump-sum payments
Payments that can be redeemed at any time

The correct answer is: Payments based on the lives of two or more annuitants

A joint and survivor annuity is structured to provide regular payments to two or more annuitants for as long as at least one of them is alive. This means that upon the death of the first annuitant, the payments will continue to the survivor, ensuring a steady income stream until the death of the last annuitant. This type of annuity is often used in situations where couples seek to ensure that their surviving partner has financial support after one partner passes away. By design, it increases financial security for both parties during their lifetimes, making this option particularly beneficial for married couples or partners in a long-term relationship. The other options do not accurately capture the essence of what a joint and survivor annuity entails, as it is essential that the payments continue based on the longevity of the annuitants rather than being limited to a single individual or involving lump-sum payouts.