Tontine?

Que Es?

Tontine

Before Social Security and other retirement programs, tontines offered an opportunity for financial security. Their disuse in recent years has further propelled their mystique. They've been the subject of sitcoms and murder mysteries. Jeff got the idea from an old TV show to start one since he's distrustful of Social Security. But what exactly is a tontine, and are they even legal in today's world? Let's help Jeff understand exactly what he's potentially getting into.

Definition

A tontine is a financial scheme where a group of people invests a sum of money, with the principal, or invested amount being returned to the last surviving investor. This investment is irrevocable; the money cannot be taken out again. An individual investor will receive interest or dividends from the tontine based on the investment's performance. As each investor dies, their shares or proportional ownership of the tontine are redistributed to the survivors. Thus, the remaining shareholders receive larger dividends as more of the tontine members die.

Although the concept of life insurance can be morbid in itself, with traditional life insurance the payout on Jeff's policy is entirely dependent on whether or not he dies while covered. With a tontine, he benefits financially from the deaths of others. It's this element that has influenced the plotlines of many murders in fiction since tontine shareholders realize the death of other members. Another factor that offers unease to some while at the same time explaining the popularity of the tontine is the element of gambling. After all, Jeff figures he might put in a few thousand dollars but maybe one day hit a multi-million dollar jackpot if he outlives the other participants. https://study.com/academy/lesson/what-is-a-tontine-definition-legality.html

A tontine (/ˈtɒntaɪn, -iːn, ˌtɒnˈtiːn/) is an investment plan for raising capital, devised in the 17th century and relatively widespread in the 18th and 19th centuries.

Tontine Hotel sign, Ironbridge, Shropshire, UK

It enables subscribers to share the risk of living a long life by combining features of a group annuity with a kind of mortality lottery. Each subscriber pays an agreed sum into the fund and thereafter receives a periodical payout. As members die, their payout entitlements devolve to the other participants, and so the value of each continuing payout increases. On the death of the last member, the scheme is wound up.^[1]

https://en.m.wikipedia.org/wiki/Tontine