Oklahoma Life Producer Practice Exam

What is the primary purpose of an annuity in relation to an estate?

1. Create

2. Preserve

3. Liquidate

4. Transfer

The correct answer is: Liquidate

The primary purpose of an annuity in relation to an estate is to provide a steady stream of income over a period of time, which helps in the liquidation of assets to meet obligations or provide for beneficiaries. Annuities can be designed to convert a lump sum of money into periodic income, which is particularly useful for covering expenses, ensuring financial security for the owner or beneficiaries. This aspect of liquidating funds allows the estate to efficiently meet its financial needs or obligations, such as taxes, debts, or distributions to heirs. Other options, while relevant in certain contexts, do not capture the central function of how annuities operate within an estate. For instance, creating an estate involves various financial instruments, and preserving an estate typically refers to protecting it from loss or depletion, neither of which specifically highlights the income-generating capability of annuities. Similarly, transferring wealth pertains to how assets are passed down, but does not directly address the financial role annuities play in managing funds within an estate.