How to Set Up an Annuity for Settlement Funds for a Child in Georgia | Georgia Estate Planning

Detailed Answer — How to set up an annuity for settlement funds for a child under Georgia law

Short answer: You usually must get the Georgia court that approves a minor’s settlement to authorize using settlement money to buy an annuity. The court will want proof that the annuity is in the child’s best interest, that the insurer is licensed in Georgia, and that fees or ongoing costs are reasonable. Depending on the amount, the court may instead require a blocked account, a custodial account, a guardianship/conservatorship trust, or appointment of a trustee to manage the funds.

This article explains the practical steps, the choices you’ll face, and the typical court-review process in Georgia so you can talk confidently with an attorney and a financial professional.

1. Why a court is usually involved

When a minor receives settlement funds (for example, from a personal injury or wrongful-death settlement), Georgia courts typically must approve the compromise of the minor’s claim and the way the money will be handled to protect the minor’s interests. That review can include approving an annuity purchase as the method of preserving and distributing the settlement proceeds. Georgia’s laws on guardianship and the protection of minors’ property govern this process (see Georgia General Assembly resources on guardianship and related statutes: https://www.legis.ga.gov/).

2. Main options for handling a minor’s settlement money

Buy an annuity (structured settlement). The insurer issues a contract that pays the child a stream of payments (monthly, yearly, or lump sums at set ages). Courts will examine the contract terms and insurer licensing.
Blocked bank account. The bank holds funds and won’t release them without a court order. This is common for modest settlements.
Custodial account (e.g., UTMA/UGMA-type arrangement). A custodian manages funds for the child until a statutory age. Whether UTMA/UGMA applies and exact rules vary; courts may prefer supervised arrangements for larger sums.
Guardianship or conservatorship (court-supervised trust). If the amount is large or the child needs special protections, the court can appoint a conservator or require a trust with periodic accountings.

3. How the annuity route typically works (step-by-step)

Hire an attorney experienced in minor settlements. They will prepare the settlement paperwork, the petition to the court to approve the settlement, and the proposed order describing how funds will be used (for example, to purchase an annuity).
Choose an annuity product and insurer. Get illustrations showing payment schedules, costs, and guarantees. Use an insurer licensed to sell annuities in Georgia; you or your lawyer can verify licensing through the Georgia Office of Commissioner of Insurance: https://oci.georgia.gov/.
Prepare evidence for the court. Provide the proposed annuity contract or a firm quote, a written explanation of why the annuity is in the child’s best interest (compare alternatives), and disclosure of fees, commissions, and tax consequences.
File a petition and give required notice. The petition asking the court to approve the settlement and the annuity purchase will usually require notice to interested parties (the other parent, insurers, and sometimes the child’s other relatives). The court will hold a hearing or review the papers.
Court approval and order. If the court finds the arrangement protective of the child, it will enter an order approving the settlement and authorizing the insurer to issue the annuity or authorizing the purchase from settlement funds. The order will specify who receives payments, when payments begin, and any reporting requirements to the court.
Purchase and administration. The settlement check is paid as directed by the court order (often to the insurer or to a court-controlled account to fund the annuity). The insurer issues the annuity and begins scheduled payments or makes deferred payments as directed.

4. Practical decisions you’ll need to make

Immediate vs. deferred payments: Immediate annuities begin paying right away. Deferred annuities start payments at a future date or at milestone ages (for example, at age 18, 25, or 30).
Term vs. life payments: A term annuity pays for a fixed number of years. A life annuity pays for the annuitant’s lifetime (and sometimes provides death benefits or minimum-period guarantees).
Fixed vs. variable or indexed: Fixed annuities give predictable income. Variable/indexed annuities can have growth potential but carry more risk and complexity.
Who is the payee: The court will specify whether the child is the annuitant and payee, or whether payments go to a conservator/trust. Many courts require the payments be made to a guardian or trustee until the child reaches a certain age.
Fees and commissions: Disclose and minimize fees. Courts scrutinize commissions and costs charged to the minor’s funds.

5. Tax and public benefits considerations

Payments from an annuity may have income tax implications. How much is taxable depends on the composition of the settlement and the annuity structure. If the child receives or may qualify for public benefits (Medicaid, SSI), structured payments or a special needs trust may be necessary to preserve benefits. Ask both your attorney and a tax advisor about federal tax rules and how a structured settlement interacts with benefits.

6. When a guardian/conservator or trust is better

If the settlement sum is large, or the child has ongoing medical or special-needs concerns, the court may prefer a trust or conservatorship arrangement rather than a straight annuity. A trustee can invest, pay expenses, and follow court-ordered distributions. For children who rely on means-tested benefits, a special needs trust may maintain eligibility while supplementing care.

7. Practical example (hypothetical)

Suppose a 10-year-old receives a $300,000 settlement for injuries. The parent’s attorney petitions the court to approve buying a deferred fixed annuity from an insurer licensed in Georgia. The proposal: $300,000 purchases an annuity that begins paying $1,500 per month at age 18 and increases to $2,000 per month at age 25. The petition includes insurer licensing confirmation, a no-commission or low-commission quote, and a written comparison to a blocked account and a trust. The court reviews and enters an order authorizing the annuity purchase and appointing a conservator to receive payments until the child turns 25.

8. Who to involve

An attorney experienced with minor settlements and Georgia guardianship practice.
A licensed insurance professional who works with structured settlements and who will use annuity products from insurers licensed in Georgia (verify at https://oci.georgia.gov/).
A financial planner or accountant to explain tax consequences and long-term planning.

9. Where to find Georgia law and court resources

Georgia General Assembly — Georgia Code and statutory titles (guardianship and related provisions): https://www.legis.ga.gov/
Georgia Office of the Commissioner of Insurance — confirm insurer licensing and consumer guides: https://oci.georgia.gov/
Georgia Courts — local court forms and procedural information about approving settlements and guardianships: https://www.georgiacourts.gov/

10. Common pitfalls to avoid

Don’t buy an annuity from an insurer that isn’t licensed in Georgia without court approval.
Don’t skip court approval if the settlement and the child’s right to funds require judicial oversight; that can invalidate the arrangement or expose you to liability.
Don’t accept high commissions or complex product features without full disclosure to the court and a clear explanation of why they benefit the child.
Consider future needs — educational costs, medical care, and ability to qualify for benefits — when choosing the annuity structure.

Helpful Hints

Start early. Gathering annuity quotes, insurer licensing info, and a plan for court filing takes time.
Get several annuity illustrations in writing. The court will want concrete numbers showing payment amounts and start dates.
Ask the insurer for a written statement of guarantees, surrender clauses, and replacement/commutation rules.
Make sure the petition to the court explains why the chosen structure (annuity vs. trust vs. blocked account) serves the child’s best interest.
Confirm whether your county court requires a hearing and how much notice must be given to interested parties.
If the child receives public benefits or may in the future, discuss a special needs trust with your attorney before purchasing an annuity.
Keep records. Save the court order, annuity contract, insurer communications, and all financial statements for future reporting to the court.

Disclaimer: This information explains general Georgia practice and steps commonly taken when an annuity is used to manage settlement funds for a child. It is educational only and does not constitute legal advice. Laws change, and every case has unique facts. Consult a licensed Georgia attorney experienced in minor settlements and guardianship, and consult a licensed tax or financial professional, before making decisions.