Annuities may be, and very frequently are, created by will, and such a bequest is considered in law as a general legacy ; and, in case of a deficiency in the estate of the testator, it will abate proportionably with the other legacies. The payment of an annuity may be charged either upon some particular fund (in which case if the fund fails the annuity ceases) or upon the whole personal estate of the grantor ; which is usually effected by a deed of covenant, a bond, or a warrant of at torney. If the person charged with the payment of an annuity becomes bankrupt, the annuity may be proved as a debt before the commissioners, and its value ascertained, according to the provisions of the bankrupt act (6 Geo. IV. c. 16, § 54). The value thus ascertained be comes a debt charged upon the estate of the bankrupt; and hereby both the bank rupt and his surety are discharged from all subsequent payments.
If the person on whose life an annuity is granted dies between two days of pay ment, the grantee has no claim whatever in respect of the time elapsed since the last day of payment: from this rale, however, are excepted such annuities as are granted for the maintenance of the grantee ; and the parties may in all cases, if they choose it, by an express agree ment, provide that the grantee shall have a rateable portion of the annuity for the time between the last payment and the death of the person on whose life it is granted. On government annuities a quarter's annuity is paid to the executors of an annuitant, if they come in and prove the death. (Comyns, Digest, tit. " Annuity " Lumley, On Annuities.) ANNUITY, a term derived from the Latin, annul, year ; signifying, in its most general sense, any fixed suns of money which is payable either yearly or in given portions at stated periods of the year. Thus, the lease of a house, which lets for 501. a year, and which has 17 years to run, is to the owner an annuity of 501. for 17 years. In an ordinary use of the term, it signifies a sum of money payable to an individual during life. In the former case, it is called, in technical language, an annuity certain ; and in the latter, a life annuity.
It is evident that every beneficial in terest, which is either to continue for ever, or to stop at the end of a given time, such as a freehold, a lease, a debt to be paid in yearly instalments, &c., is contained under the general head of an annuity certain, while every such interest which terminates with the lives of any one or more individuals, all that in law is called a life-estate, and all salaries, as well as what are most commonly known by the name of life annuities, fall under the latter term. Closely connected with
this part of the subject are COPYHOLD8 (which see), in which an estate is held daring certain lives, but in which there is a power of renewing any life when it drops, that is, substituting another life in place of the former, on payment of a fine -REVERSIONS, or the interest which the next proprietor has in any estate, &c., after the death of the present—a ad life insurance, in which the question is, what annuity must A. pay to B. during his life, in order that B may pay a given sum to A.'s executors at his death ? If money could not be improved at in terest, the value of an annuity certain would simply be the yearly sum mul tiplied by the number of years it is to continue to be paid. Thus a lease for 3 years of a house which is worth 1001. a year, might either be bought by paying the rent yearly, or by paying 300/. at once. A life annuity, in such a case, will be worth an annuity certain, continued for the average number of years lived by individuals of the same age as the one to whom the annuity is granted. But if compound interest be supposed, which is always the case in real transactions of this kind, the landlord, in the case of the annuity certain just alluded to, must only receive such a sum, as when put out to interest, with 1001. subtracted every year for rent, will just be exhausted at the end of 3 years. To exemplify this, let us suppose that money can be improved at 4 per cent. In Table I., in the column headed 4 p. c. (4 per cent.), we find 2175 opposite to 3 in the first column, by which is meant that the present value of an an nuity of one pound to last 3 years is 2175/., or 2a1. The present value of an an nuity of 1001. under the same circum stances is therefore 277.51., or 2771. 10a. This is the value of a lease for three years corresponding to a yearly rent of 100/. The landlord who receives this, and puts it out at 4 per cent., will, at the end of one year, have 288/. 12s. From this he subtracts 1001. for the rent which has become due, and puts out the re mainder, 188/. 12s., again at 4 per cent. At the end of a year this has increased to 1961. 28. 10Id., from which 100/. is again subtracted for rent. The remainder, 96/. 2s. 10/d., again put out at interest, be comes at the end of the year 99/. 19s. 9d., within three pence of the last year's rent. This little difference arises from the im perfection of the Table, which extends to three decimal places only.