Definition
A periodic payment — typically annual, though modern instruments may pay monthly or quarterly — made to a named recipient (the annuitant) over a defined term, for the recipient's lifetime, or in perpetuity. The obligation to pay runs against the person or entity that granted the annuity, not against any specific piece of property.
In modern usage, annuities appear in three principal contexts:
1. Private annuity (common law form): A contractual obligation by one party to make periodic payments to another, chargeable against the grantor personally. The classic form recognized by historical dictionaries — distinct from a rent-charge, which burdens land.
2. Commercial annuity (insurance product): A contract, typically issued by a life insurance company, under which the insurer receives a lump sum or series of premiums and agrees to pay the annuitant a fixed or variable stream of income. Modern annuities in this form are primarily regulated as insurance products, though variable annuities with securities features are also regulated by the SEC and FINRA.
3. Structured settlement annuity: An annuity used to fund periodic payments agreed upon in settlement of a personal injury or wrongful death claim, often given favorable tax treatment.
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Common Language
Modern common usage (Wiktionary): A right to receive amounts of money regularly over a certain fixed period, in perpetuity, or especially over the remaining life or lives of one or more beneficiaries.
Historical common usage (Webster's 1913): A sum of money, payable yearly, to continue for a given number of years, for life, or forever; an annual allowance.
The common definitions are serviceable but miss a critical legal distinction: at common law, an annuity was chargeable only on the grantor's person — not on any land or estate. That distinction defined the annuity's legal character as personalty, drove how it was enforced, and separated it from the rent-charge. Modern commercial annuities are now issued by institutions rather than individuals, dissolving the personal-charge dimension, but the distinction resurfaces in estate planning contexts involving private annuities.
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Common Confusion
ANNUITY vs. RENT-CHARGE: Historical sources are consistent and emphatic on this point. A rent-charge is reserved out of, or issues from, a specific parcel of real property; the holder can distrain the land if payment fails. An annuity, at common law, is chargeable on the grantor's person alone — if the grantor dies without paying, the remedy is against the estate, not against specific land. Researchers working in older equity or probate records must not treat these terms as interchangeable; their remedial postures differ significantly.
ANNUITY vs. PENSION: In common speech, pension and annuity are often used loosely as synonyms for a retirement income stream. In tax law and ERISA contexts, they carry distinct regulatory and tax-treatment implications. The Internal Revenue Code addresses "pensions, annuities, and IRA distributions" as a coordinated but differentiated cluster — see Tax Encyclopedia § Gross Income.
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Recognized Forms
/SUBTYPES
Certain annuity: Payable for a fixed term of years regardless of whether the annuitant survives.
Life annuity: Payable for the duration of the annuitant's life; terminates at death.
Annuity in fee: At common law, an annuity granted to a person and their heirs — the most durable form, running perpetually.
Fixed annuity: Modern insurance product paying a guaranteed, predetermined amount per period.
Variable annuity: Modern insurance product where payments fluctuate based on the performance of underlying investment accounts; subject to securities regulation in addition to insurance regulation.
Indexed annuity: Payments tied to a market index with defined floors and caps.
Private annuity: An arrangement between private parties — commonly used in estate planning — in which property is transferred in exchange for unsecured periodic payments for the transferor's life. No commercial insurance carrier is involved. See Trusts, Estates & Probate Encyclopedia § Installment Sales, Private Annuities, and Self-Canceling Installment Notes.
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Why It Matters in Research
Temporal gap in terminology: Sources from the nineteenth century and earlier use "annuity" exclusively in its common law sense — a personal obligation of the grantor, enforceable against the person, classifiable as personalty. Researchers reading older equity pleadings, probate inventories, or chancery records must apply that framework. The modern insurance-product sense of annuity was not the operative meaning in those materials.
The action of annuity: Burrill notes that "annuity" was also the name of a common law action — a writ by which the grantee could compel the grantor to pay. This procedural dimension disappears from later dictionaries and is entirely absent from modern usage. If you encounter "an action of annuity" in older pleading records, this is the reference.
Tax treatment is a distinct research track: The tax consequences of annuity payments — exclusion ratios, constructive receipt, the treatment of employer-provided annuities under IRC § 72 — are a separate body of law from the property-law definition. Conflating the two when researching either track creates errors. See Tax Encyclopedia § Gross Income — Pensions, Annuities, and IRA Distributions.
Estate planning use: Private annuities are a live estate-planning technique for transferring appreciated assets while deferring or reducing gift and estate tax exposure. The self-canceling feature (payments stop at death, with no estate inclusion) is a key planning variable. Researchers in this area should work from the Trusts, Estates & Probate Encyclopedia entry alongside current IRS guidance on valuation.
Insurance regulation vs. securities regulation: Modern variable and indexed annuity products occupy contested regulatory territory. Whether a given product is primarily an insurance contract or a security affects which regulatory regime governs sales practices, disclosure, and suitability. This is an active area of regulatory development, and historical dictionary sources offer no guidance.
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Historical Dictionary Support
The four source dictionaries are in close agreement on the classical definition: an annuity is a yearly sum, chargeable on the person of the grantor, payable in fee, for life, or for years. All four cite Coke on Littleton (144b) as the primary authority, reflecting the term's deep common law roots. Blackstone's Commentaries (2 Bl. Com. 40-41) and Kent's Commentaries are also invoked by Burrill to anchor the personal-charge distinction.
Anderson's entry adds a useful clarification that historical sources tend to elide: an annuity "is neither 'income' nor 'profits,' nor does it vary with them, though a certain fund may be pledged for its payment." This distinction mattered in older income tax and trust accounting disputes and is worth flagging for researchers working in those areas.
What the historical dictionaries do not address — because it did not yet exist in its modern form — is the commercial insurance annuity, the variable annuity, or the tax treatment framework now codified in the Internal Revenue Code. The gap between the classical definition and modern practice is substantial, and no synthesis of the historical dictionary entries alone will equip a researcher to navigate modern annuity law.
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Jurisdictional Note
Commercial annuities are primarily regulated at the state level through insurance departments, with significant variation in suitability standards, surrender charge rules, and disclosure requirements. Variable annuities additionally fall under federal securities regulation. Private annuities in estate planning are governed by federal tax law for income and transfer tax purposes, but the underlying contract is a creature of state law.
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Encyclopedia Cross-Reference
Insurance Law Encyclopedia § Annuities — Fixed, Variable, and Indexed Annuities, and Insurance vs. Securities Regulation
Tax Encyclopedia § Gross Income — Pensions, Annuities, and IRA Distributions
Trusts, Estates & Probate Encyclopedia § Installment Sales, Private Annuities, and Self-Canceling Installment Notes (SCINs)
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