An annuity is a contract to receive fixed, periodic payments, either for life or a specified number of years. When an annuity is purchased, the person usually pays a lump sum premium in exchange for the guaranteed payments.
Review the terms of the annuity to determine the amount to count as an asset and the amount to count as income. In general, if periodic payments have not yet started, access to the principal is allowed. If so, count the principal of the annuity as an available asset. If terms of the annuity do not permit access to the principal, do not count the principal as an available asset. Treat as income any payments made to or for the benefit of the client.