Detailed answer — step-by-step overview under Maryland considerations

When a child in Maryland receives a settlement (for example, a personal-injury award, insurance payout, or wrongful-death distribution), a parent or guardian often needs to protect those funds so they are available for the child’s care and cannot be wasted. One common tool is a structured settlement (an annuity that pays the child over time). Below is a clear, practical roadmap of how that typically works and important Maryland-specific considerations.

1) Confirm legal status of the money and whether court approval is needed

Most settlements on behalf of a minor must be approved by a Maryland court to ensure the settlement serves the child’s best interests. If the settlement has not yet been finalized, the parties and their lawyers should request court approval as part of the settlement process. If funds are already held for the child, you may need a court order to move those funds into an annuity or a protected account. For general court self-help guidance in Maryland, see the Maryland Courts resource center: https://www.mdcourts.gov/legalhelp/.

2) Decide whether a structured settlement (annuity) is the right vehicle

Common options to protect minor’s funds in Maryland include:

• Structured settlement (periodic annuity payments).
• Custodial account under the Maryland Uniform Transfers to Minors Act (UTMA) or similar vehicle (often provides a lump-sum at majority).
• Guardianship/Conservatorship (court-appointed management of a minor’s property).
• Minor’s settlement trust or special needs trust (if the child receives public benefits).

Structured settlements are often chosen to provide long-term predictable income, reduce the risk of rapid depletion, and sometimes gain favorable tax treatment on certain personal-injury awards. However, structured settlements are not always the best choice when the child has urgent large expenses or when public-benefit rules create complications.

3) If using a structured settlement, how the mechanics usually work

1. Negotiate settlement terms to include periodic payments or a plan to fund an annuity (this is easiest if you negotiate before finalizing settlement).
2. The defendant/insurer typically funds a qualified assignment or directly purchases an annuity from an insurance company to guarantee the periodic payments.
3. Choose the payment schedule: initial lump-sum (if any), guaranteed periods, inflation adjustments, future lump sums for events (college, major medical), and survivor/contingency options.
4. Obtain a proposed payment schedule and a quote from an annuity issuer acceptable to both sides.
5. File the settlement and proposed structured settlement plan with the Maryland court for approval (the judge will evaluate whether the arrangement is in the child’s best interest and may order changes).
6. After court approval, the insurer or defendant funds the annuity; the annuity company issues the contract and begins payments according to the court-ordered schedule.

4) Court approval and documentation

Maryland courts commonly require detailed paperwork: petitions or motions to approve a minor’s compromise, copies of the settlement agreement, proposed distribution plan, any guardian-of-property accounting, and a proposed order. The court will examine attorney fees, any liens, and whether the payment schedule protects the minor’s long-term needs. If the court previously approved a settlement plan, a follow-up order may be required to convert an existing lump sum into a structured annuity.

5) Special issues in Maryland to watch for

• Public benefits: If the child receives or might apply for Medicaid, SSI, or other needs-based benefits, a structured settlement can affect eligibility. Consider using a properly drafted special needs trust or other tools to preserve benefits. Consult counsel experienced in benefits planning.
• Guardian of property vs. UTMA: A UTMA custodial account can be simple but typically pays out at the age of majority; if you want controlled distributions beyond that age, a trust or court-supervised arrangement may be required.
• Insurance licensing and annuity providers: Ensure the annuity issuer is reputable and licensed to do business in Maryland. The Maryland Insurance Administration offers consumer resources about annuities: https://insurance.maryland.gov/.

6) Tax and federal rules

Tax issues for settlement payments (and for annuity payments) can be complex. Structured settlements arising from personal-injury awards are often tax-favored in specific circumstances, but you should not rely on this explanation for tax planning. Speak with a tax advisor about the federal tax consequences before finalizing any annuity funding plan.

7) Practical steps to start right now

1. Talk to the plaintiff’s and defendant’s attorneys about using a structured settlement option before finalizing the written settlement.
2. Ask the insurer for an annuity quote and payment schedule options and request identification of an annuity issuer acceptable to the court.
3. Work with counsel to prepare the court filing to approve the minor’s settlement (petition/motion, proposed order, and supporting documents).
4. If the child receives public benefits, consult a benefits attorney to determine whether you need a special needs trust or other protections.
5. Once the court approves, confirm that the annuity issuer issues the contract and that payments begin as ordered.

8) When you need an attorney in Maryland

Consider hiring a Maryland attorney if any of the following apply:

• The opposing side resists court approval or wants to pay a single lump sum that you think is unsafe for the child.
• The child currently gets Medicaid, SSI, or other public benefits.
• There are liens (medical, subrogation) or complex fee arrangements to resolve.
• You need a guardianship or conservatorship appointment to manage existing funds.

Maryland court clerks and self-help centers can assist with forms and procedural questions, but they cannot give legal advice. See the Maryland Courts self-help center for resources: https://www.mdcourts.gov/legalhelp/.

Disclaimer: This article is for general information only and is not legal advice. It does not create an attorney-client relationship. For advice specific to your situation, consult a qualified Maryland attorney and a tax or benefits specialist.

Helpful Hints

• Start early: negotiate structured payments before the final settlement to simplify the process and lower court friction.
• Get several annuity quotes to compare pricing and benefits (some annuity features add cost).
• Document everything: settlement agreement language should state who will buy/assign the annuity and how payments will be made.
• Check the annuity issuer’s ratings and Maryland licensing via the Maryland Insurance Administration: https://insurance.maryland.gov/.
• If the child receives public benefits, do not convert funds or accept payments without discussing special needs trust options first.
• Understand that court approval focuses on the child’s best interest — be ready to explain why the annuity schedule meets that standard.
• Keep copies of the court order and the annuity contract in a secure place; courts and benefit agencies may ask for them later.
• Ask the annuity company how payments are handled if the annuity issuer is later unable to pay (reinsurance, state guaranty associations). Maryland’s insurance regulator can help explain protections.