Survivor Funds

89 Pages Posted: 28 Jul 2016 Last revised: 26 Mar 2017

Date Written: March 1, 2017


This Article explains how to create “survivor funds” — short-term investment funds that would pay more to those investors who live until the end of the fund’s term than to those who die before then. For example, instead of just investing in a 10-year bond and dividing the proceeds among the investors at the end of the bond term, a survivor fund would invest in that 10-year bond but divide the proceeds only among those who survived the full ten years. These survivor funds would be attractive investments because the survivors would get a greater return on their investments, while the decedents, for obvious reasons, would not care.

Survivor funds would work like short-term tontines. Basically, a tontine is a financial product that combines features of an annuity and a lottery. In a simple tontine, a group of investors pool their money together to buy a portfolio of investments, and, as investors die, their shares are forfeited, often with the entire fund going to the last survivor. For example, in an episode of the popular television series M*A*S*H, Colonel Sherman T. Potter, as the last survivor of his World War I unit, got to open the bottle of cognac that he and his fellow doughboys brought back from France (and share it with his Korean War compatriots). Similarly, in the reality television show Survivor, contestants are stranded in a remote location, and the last “survivor” gets a million-dollar prize.

Of course, the survivor principle — that the share of each, at death, is enjoyed by the survivors — can be used to design financial products that would benefit multiple survivors, not just the last survivor. For example, elsewhere, we showed how tontines could be used to create so-called “tontine annuities” and “tontine pensions” that would benefit lots of retirees. In this Article, we show how the survivor principle can be used to create survivor funds that would only make payments to those who survive for a specified number of years.

Keywords: Longevity, Tontine, Annuity, Investment Funds, Bonds, Variable Annuity, Expense Ratio, Defined Contribution, Pension Reform, Retirement Income Security, Survivor Benefits

JEL Classification: D92, E21, G22, G23, G24, H24, H55, J11, J14, J17, J26, K23, K31, K34

Suggested Citation

Forman, Jonathan Barry and Sabin, Michael J., Survivor Funds (March 1, 2017). Pace Law Review, Vol. 37, No. 1, pp. 204-291, 2017, Available at SSRN:

Jonathan Barry Forman (Contact Author)

University of Oklahoma College of Law ( email )

300 Timberdell Road
Norman, OK 73019
United States
405-325-4779 (Phone)
405-325-0389 (Fax)


Michael J. Sabin

Independent ( email )

Sunnyvale, CA 94087

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