An annuity contract: an alternative to a will or a gift deed

A will and a gift deed aren't the only ways to pass property to a specific person. Between them sits a third instrument - an annuity contract, which protects the interests of both the person giving up the property and the one receiving it. Here's how it works, and what risks to check when buying an apartment with an annuity in its history.

How an annuity differs from a will and a gift deed

A will is only an intention that can be rewritten as many times as needed right up until death - the named recipient has no guarantee until the estate is opened. A gift deed is the opposite extreme: ownership transfers immediately and unconditionally, and the giver loses control of the property, left entirely dependent on the new owner's goodwill. An annuity contract sits in between: ownership registers to the recipient right away, but in exchange, the former owner - now the annuity beneficiary - gets a legal right to regular payments or care for the rest of their life.

How the encumbrance works

An apartment transferred under an annuity contract carries a registered encumbrance in favor of the former owner. While they're alive, the new owner can't freely dispose of the property - selling, mortgaging or gifting it without the annuity beneficiary's consent is practically impossible. If the contract terms aren't met - payments stop or the promised care isn't provided - the beneficiary can go to court and have the contract terminated, getting the property back.

Two contract types: a general annuity and lifetime maintenance with dependency

The Civil Code distinguishes a general annuity contract from its more detailed variant - lifetime maintenance with dependency. The latter lets the contract specify not just the amount and schedule of payments but concrete obligations: buying groceries and medication, providing care, covering utilities, living arrangements. The more precisely the payer's obligations are spelled out, the easier it is to prove something in a dispute.

Why an annuity benefits the recipient too

An annuity isn't only appealing to the person giving up the property - it benefits the recipient as well: ownership registers right away, not after someone's death. By the time the annuity beneficiary passes away, the new owner has often already cleared the minimum ownership period - meaning no tax is due on a later sale.

Risks when buying an apartment received under an annuity contract

If a seller received an apartment under an annuity contract, it's worth requesting the contract itself and proof that the payments or care were actually provided. Rosreestr removes the encumbrance based on an application from the parties or a court ruling, without independently verifying whether the contract was actually fulfilled - a clean title extract alone doesn't mean the annuity obligations were met in good faith. If little time has passed since the encumbrance was lifted, and the beneficiary has first-priority heirs, the risk of the contract later being challenged as unfulfilled is higher.

What to consider when signing or buying under an annuity contract

• Sign an annuity contract only through a notary - it lowers the risk of fraud on either side.
• Spell out the payer's obligations in as much detail as possible - amounts, schedule, specific types of care, not general phrasing.
• Keep documented proof of every annuity payment - bank transfers, not cash with no receipt.
• When buying an apartment with an annuity in its history, request the contract itself and proof of performance, not just a clean USRR extract.
• Assess how much time has passed since the encumbrance was lifted, and whether the beneficiary has close relatives who could challenge the deal.

Considering an annuity to transfer or receive property

Describe the situation by phone - we will help draft an annuity contract or check the history of an apartment transferred under one.

8 909 440-80-80

All articles