tontine
A tontine is an investment plan in which participants buy shares in a common fund and receive an annuity based on their shares . More specifically, it is an investment scheme in which the so-called shareholders create a common investment pool and derive some form of profit or benefit (usually financial) while they are alive. Even if a participant of the group dies, no new participant will join the plan. Therefore, after the death of the shareholder, their share gets split between the surviving shareholders in the pool and is not subject to inheritance rights. Accordingly, an annuity increases each time a participant dies.
A tontine investment comes to an end when the number of surviving shareholders in the pool reaches a previously agreed on, small number. If no number exists, then the investment becomes a part of the company or government that originally created the tontine following the death of all participants. Using tontines became illegal in the U.S. in the early 1900s.
[Last reviewed in March of 2025 by the Wex Definitions Team ]
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