Tontine Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Tontine, written in plain English, along with examples of how it is used.

What is Tontine?

It is an agreement or partnership of its kind amongst few people who agree to the be partners in investment lifelong and the last one to survive would be the one to receive all the gains and ownerships of the property.

History and Meaning of Tontine

The tontine concept came out from Italy in 1601. Tontine is an agreement made between different persons to receive an annuity, in equal proportions, for a specified period, and afterward, to the survivors or last survivor of the contracting parties. The last survivor would receive the entire income and any assets from the tontine. Tontine arrangements were popular in France during the 17th and 18th centuries, and in the USA during the 19th century until 1910.

Examples of Tontine

  1. A group of individuals agree to a tontine and pay equal amounts into it for 20 years. After 20 years, the last living member of the group will receive all the money from the tontine.

  2. Joe and Jane invest in a tontine contract with ten other investors. If Joe and Jane pass away, but the other ten investors are still alive, then Joe and Jane's investment is distributed among the ten survivors.

  3. A tontine was used to finance the construction of the Lancaster Turnpike in the late 1700s. The state of Pennsylvania sold shares of the turnpike to investors, promising that the payouts would only go to the last investor alive in a tontine.

Legal Terms Similar to Tontine

  1. Life Annuity: A fixed sum of money to be paid to an individual for the rest of their life.

  2. Survivorship: The right of the surviving joint tenant or tenant by the entirety to the ownership of the property upon the death of the other tenant.

  3. Trust: A legal or lawful agreement between at least three parties, where the trustor provides the trustee with the right to hold and distribute assets or cash to other beneficiaries, based on the terms of the contract.