Question 83

The cash value is paid to the beneficiary.

When an annuitant dies during the accumulation period, the cash value of the annuity is typically paid to the designated beneficiary. This ensures that the funds are transferred to a person or entity chosen by the annuitant, rather than being lost or redirected elsewhere.

A) The cash value is paid to the beneficiary.

This option is correct as it aligns with standard practices in annuity contracts. Upon the death of the annuitant, the cash value is usually directed to the beneficiary, allowing them to receive the benefits intended by the annuitant.

B) The cash value is paid into the estate.

This option is incorrect because the cash value of the annuity typically bypasses the estate and is paid directly to the beneficiary. If the beneficiary is named, the funds do not become part of the estate, which could delay distribution and incur additional taxes.

C) 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. Tax implications may arise depending on the beneficiary's actions, but the IRS does not receive the cash value directly.

D) The company keeps the cash value.

This option is incorrect as well. An insurance company does not retain the cash value upon the death of the annuitant if there is a named beneficiary. The funds are intended to be passed on to the beneficiary, not retained by the company.

Conclusion

The correct answer is that the cash value is paid to the beneficiary, which ensures that the funds are utilized according to the wishes of the annuitant. All other options fail to recognize the standard procedure of beneficiary designations in annuity contracts, which protects the annuitant's intent and provides financial support to the beneficiary.