Annuity contracts may be owner-driven or annuitant-driven. Being "driven" means that, absent proper structuring, certain things happen at death that are beyond the control of the parties to the contract.

So how should an annuity contract be structured? An annuity contract should be arranged in a way that produces the greatest possible flexibility for the parties involved and lowest possible taxes and penalties.

Planning an annuity's structure is of critical importance if the death benefits are to be paid as intended when one of the parties dies, and with minimum income and gift tax consequences and penalties. Structuring an annuity properly can be complicated, but should be done with care, both to newly placed and existing contracts.

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