Spousal continuation option is a specific contractual election in many deferred annuities that permits a surviving spouse beneficiary to continue the annuity in their own name after the owner's death. Instead of taking a lump sum distribution, which would generally be fully taxable, the spouse can assume ownership, maintain tax deferral, and often preserve living benefit riders and guarantees. The option typically applies when the spouse is both beneficiary and, in some designs, joint owner or annuitant. Exercising the spousal continuation option can significantly improve after-tax outcomes and retirement income security for the surviving spouse.

Advisors review the spousal continuation option when naming beneficiaries and titling annuities for married clients. At claim time, they help the surviving spouse evaluate whether continuing the contract or taking a distribution better fits their income and liquidity needs. Advisors must confirm carrier-specific rules, such as age limits, deadlines, and whether riders remain in force under spousal continuation. They also coordinate with tax advisors to model required minimum distributions and long-term tax implications. Understanding spousal continuation options allows advisors to avoid unnecessary taxation at first death and to structure annuities as durable, two-life retirement income tools.