Question 5

The cash value is paid to the beneficiary.

When an annuitant dies during the accumulation period, the cash value in the annuity is paid to the designated beneficiary. This ensures that the funds are passed on according to the annuitant's wishes.

A) The cash value is paid to the beneficiary

This option is correct because, upon the annuitant's death during the accumulation phase, the cash value of the annuity is typically transferred to the named beneficiary. This transfer occurs outside of probate, making it a straightforward process for the beneficiary to receive the funds.

B) The cash value is paid into the estate

This option is incorrect as the cash value does not automatically go into the annuitant's estate upon death. Instead, the beneficiary receives the cash value directly, which bypasses the estate and avoids potential delays and legal complications associated with probate.

C) The company keeps the cash value

This option is incorrect since the insurance company does not retain the cash value upon the annuitant's death. The cash value is specifically intended to be passed to a beneficiary, ensuring that the annuitant's investment is not lost to the company.

D) The cash value is paid to the IRS

This option is also incorrect. The cash value is not paid to the IRS upon the death of the annuitant. While taxes may be owed on the earnings of the annuity, the cash value itself is designated for the beneficiary and does not go to the IRS.

Conclusion

In summary, the correct answer is that the cash value is paid to the beneficiary, as this reflects the purpose of the annuity contract in providing financial security to the annuitant's heirs. All other options incorrectly suggest that the cash value would go to the estate, the insurance company, or the IRS, which does not align with the typical practices surrounding annuities.