Short answer. A life annuity is an aleatory contract where the debtor receives a capital — money or other property, with ownership transferred to him immediately — and in exchange must pay an annual pension or income for as long as one or more specific persons named in the contract remain alive.
What the law says
The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income.
Civil Code, Article 2021 — Life Annuity Defined. Read the full provision →
Why it is called an aleatory contract
Article 2021 describes life annuity as an aleatory contract, meaning its outcome for at least one party depends on an uncertain event — here, how long the named person or persons actually live. Neither side knows in advance whether the total pension payments will end up being worth more or less than the capital that was handed over, which is exactly the element of chance that makes it aleatory rather than a straightforward exchange of fixed values.
The capital is transferred to the debtor immediately
The person setting up the annuity hands over a capital consisting of money or other property, whose ownership is transferred to him at once — "him" being the debtor who will make the pension payments. Ownership passes right away, not gradually or only once the annuity ends, which means the debtor becomes the owner of that capital from the start, subject to the ongoing burden of paying the pension.
The debtor's obligation: an annual pension tied to a life
In return for that capital, the debtor binds himself to pay an annual pension or income during the life of one or more determinate persons. The key phrase is "determinate persons" — the annuity is tied to the lifespan of specifically identified individuals, not to a fixed term of years, so the payments continue for as long as those named persons live, however long or short that turns out to be.
What makes this different from paying off a debt over time
Because the obligation to pay runs for the life of a determinate person rather than for a fixed period, a life annuity carries genuine uncertainty for both sides — the debtor might end up paying far more than the capital's value if the named person lives a long time, or far less if that person dies soon after the contract begins. That uncertainty, built directly into how long the payment obligation lasts, is what separates a life annuity from an ordinary installment arrangement with a set number of payments.