Quick answer (FAQ style)

If you have settlement money being held for a Kentucky minor, the usual path is to ask the court to approve how the money will be invested or paid out. A common approved option is buying an annuity (a structured settlement) that pays the child either a lump sum at a future age or a stream of periodic payments. You normally need: court approval or guardian authority, a properly underwritten annuity from a licensed insurer, detailed court orders describing the payment schedule, and paperwork showing the annuity is final and irrevocable. Work with the claimant’s guardian or guardian ad litem and the court to make sure the arrangement complies with Kentucky procedure.

Detailed answer — step-by-step

1. Identify who must approve the settlement and annuity

When settlement funds are for a child, a Kentucky court usually must approve the settlement or the way funds will be managed. That approval can happen in a minor settlement hearing, in probate/guardianship proceedings, or by a judge reviewing a suggested plan prepared by a guardian or guardian ad litem. If a parent has been appointed as a statutory guardian or a conservator role has been established by the court, that guardian may propose buying an annuity on the child’s behalf. If no guardian exists, the court may require appointment of a guardian ad litem or counsel to protect the child’s interests.

2. Choose the type of annuity and payment schedule

Common options:

• Single-life deferred annuity that begins paying at a specified age (for example, age 18, 21, 25 or later).
• Periodic payments (monthly, quarterly, annually) for a set term or for life.
• Combination: some immediate small payments plus larger deferred payments.

Pick the structure that best serves the child’s anticipated needs (education, medical needs, long-term support). Courts favor arrangements that balance present needs and protection against waste.

3. Select a licensed insurance company and an annuity product

Buy the annuity from an insurer authorized to do business in Kentucky. The insurer will underwrite the contract and issue either an annuity contract or a structured-settlement instrument payable to the child (or to a trustee or custodian designated by the court). The transaction should produce a final, irrevocable contract so the court can approve it as a protective device for the minor.

4. Prepare the court application and proposed order

The court will want a clear written plan showing how the annuity will pay, who receives payments, what happens if the payee dies, and how administrative or broker fees are handled. Typical contents:

• Copy of settlement agreement and statement of total funds to be invested.
• Description of the annuity (issuer, product name, payment schedule, purchaser of annuity, premium amount).
• Explanation why the annuity benefits the minor and protects against waste.
• Proof the insurance company is licensed in Kentucky or explanation of any out-of-state insurer’s qualifications.
• Proposed judgment or order approving the purchase and naming the beneficiary/recipient (the child or a trustee/custodian) and any conservator or guardian authorized to manage remaining non-annuitized funds.
• Affidavits from guardian/guardian ad litem and/or counsel supporting the plan.

5. Obtain court approval

File the petition with the appropriate Kentucky circuit court (probate/juvenile or civil division handling the settlement). The court will review the proposed annuity purchase and either hold a hearing or approve it on the papers. Once the judge signs the order, proceed to purchase the annuity in conformance with the order. Court approval is critical: without it, the insurer or opposing party may not accept the purchase, and the court may later question the transaction.

6. Buy the annuity and provide proof to the court

After purchase, file or submit the executed annuity contract, confirmation of premium payment, and any assignment/beneficiary documents required by the court. The court typically requires evidence the annuity is irrevocable and that payments will be made exactly as approved.

7. Address tax, Medicaid, and public benefits implications

Annuity payments may have tax consequences and may affect eligibility for means-tested benefits (e.g., Medicaid). Consult a tax professional and, if the child receives public benefits or may in the future, discuss how structured payments interact with those programs. Sometimes courts or attorneys include provisions to preserve a child’s future benefit eligibility.

8. Consider alternatives and backstops

If an annuity is not suitable, courts may approve other options, such as: placing funds in a blocked account supervised by the court, appointing a conservator to manage an investment account, using a trust (including a minor’s trust), or transferring smaller sums to a custodial account under the Kentucky equivalent of the Uniform Transfers/Guardianship statutes. Each option has different flexibility, cost, and court oversight levels.

Hypothetical example

Suppose a 12-year-old child receives a $250,000 settlement for an injury. The parent petitioned the county circuit court to approve a plan. The guardian proposes purchasing an annuity costing $200,000 that will pay $1,000 monthly starting at age 18 and a $50,000 educational lump sum at age 21, and keeping the remaining $50,000 in a blocked bank account for immediate medical needs. The court requires documented quotes from two insurers, confirms the insurer is licensed to sell annuities in Kentucky, and signs an order approving the purchase and describing the payment schedule and reporting requirements. The guardian purchases the annuity and files proof with the court. The arrangement ensures the child has funds for education, avoids wasting a large lump sum at age 18, and retains funds for present medical needs.

Kentucky-specific practice points

• Court approval is generally required before settlement funds for a minor can be disbursed or committed to an annuity. Confirm the local circuit court’s procedures for minor settlement approval.
• Courts prefer irrevocable annuities or payments made directly to the child or to a court-approved trustee/custodian with detailed orders to avoid future challenges.
• Insurers must be authorized to do business in Kentucky. Ask the insurer for certification showing authority to issue the annuity.
• Structured settlements that use periodic payments are common for personal-injury settlements; ensure any structured-settlement factoring or assignment is disclosed and court-approved.
• Work with counsel or a court-appointed guardian ad litem in contested cases or where the settlement is sizeable.

For general reference to Kentucky law and court forms, see the Kentucky Revised Statutes and the Kentucky Court of Justice site: Kentucky Revised Statutes (search) and Kentucky Court of Justice.

When to hire an attorney

Hire a Kentucky attorney if any of these apply:

• The settlement is large or complicated.
• The insurer or payer resists court approval for any proposed annuity.
• There is a dispute about who should manage the funds or who the beneficiary will be.
• There are potential public-benefit or tax consequences.
• You need a trust, special needs planning, or long-term financial advice.

Helpful hints

• Start early: court approval and annuity underwriting take time.
• Get written price quotes from at least two insurers or structured-settlement brokers to show the court you sought a reasonable deal.
• Ask the insurer to label the annuity as irrevocable and to provide a certificate the court can file.
• Keep the payout schedule clear in the court order: exact amounts, start dates, recipients, and what happens if the child dies.
• Consider a trust or trustee for control if you want flexibility that an annuity cannot offer.
• Document all communications and include the guardian ad litem’s report if one was appointed.
• Review how the annuity interacts with Medicaid or other benefits before finalizing an arrangement.