Detailed Answer — How to set up an annuity for settlement funds held for a child under Mississippi law
When an injury claim, insurance settlement, or lawsuit resolves in favor of a minor, the state and the courts treat the child’s recovery as property that must be protected until the child can manage it. In Mississippi, you will generally need court involvement or another formal mechanism to place a settlement into an annuity so the payments are secure and meet the child’s long‑term needs. The following explains the typical steps, legal considerations, and choices you’ll face. This is a general guide — consult a Mississippi attorney for advice that fits your situation.
1. Who must approve the settlement?
Most Mississippi courts require judicial approval to compromise a minor’s personal injury or other tort claim. That approval protects the minor from an unreasonable settlement and ensures funds are handled appropriately after settlement. Depending on the case, the judge may:
- Approve a compromise (often after a hearing);
- Appoint a guardian of the estate for the minor or authorize a custodian under the state’s custodial-transfer rules; or
- Order that funds be placed in a blocked or restricted account or applied to purchase a structured annuity.
To find the relevant Mississippi statutes and local court rules that govern guardianships and probate practice, start at the Mississippi Legislature and the state courts:
- Mississippi Legislature (statutes and code search): https://www.legislature.ms.gov/
- Mississippi Judiciary / Courts: https://courts.ms.gov/
2. Usual procedural steps to put settlement money into an annuity
- Notify the court and file the required petition. Your lawyer will typically file a petition for approval of the minor’s compromise or to appoint a guardian of the estate if one is not already in place. The petition asks the judge to approve the terms of the settlement and approve disposition of the funds (including purchase of an annuity).
- Provide supporting information to the judge. Courts usually want evidence showing the settlement amount, the minor’s needs, expected future expenses, and why an annuity is appropriate. The court may also require a guardian ad litem, medical records, a life-care plan, or an independent appraisal of the settlement terms.
- Select the annuity structure and issuer. The parties propose a structured settlement or commercial annuity from an insurer authorized to do business in Mississippi. The petition should describe the payment schedule (periodic payments, start date, length) and identify the insurance company or annuity issuer.
- Court review and hearing. The judge reviews the petition, may hold a hearing, and then either approves, modifies, or rejects the proposed disposition. If approved, the order will state how funds are paid and who will manage the payments for the child.
- Settlement funds are paid and annuity purchased. Once the court signs an order, the defendant/insurer or settlement payor sends funds in accordance with the order — either directly to the annuity issuer or to a fiduciary who then purchases the annuity on the child’s behalf.
- Ongoing reporting (if required). If the court appointed a guardian, the guardian typically must file periodic accountings showing how funds are invested and spent.
3. Annuity types and practical considerations
Common choices include:
- Immediate annuity — starts payments right away and converts a lump sum into a guaranteed stream of payments.
- Deferred annuity — begins payments at a future date (useful if you want to provide more funds when the child turns 18, 21, or another milestone).
- Life-contingent versus guaranteed period — payments may be tied to the child’s lifetime or guaranteed for a fixed period (for example, 20 years), with survivor or rollover options.
Pick an issuer licensed in Mississippi and check the insurer’s financial strength and reputation. The judge will want to see that the arrangement serves the child’s best interest.
4. Alternatives to annuities
Annuities aren’t the only option. Alternatives include:
- Blocked or restricted bank account. The court places funds in a bank account that requires court permission for withdrawals beyond specified amounts.
- Guardianship or conservatorship account. A court‑appointed guardian of the estate manages investments and makes expenditures for the child’s benefit, with required accountings to the court.
- Custodial account under Mississippi’s transfer-to-minor statute (if available). Some states allow transfers to custodial accounts (UTMA/UGMA); check whether Mississippi’s statutes or local practice provide a custodial transfer procedure and whether the amount and purpose are suitable.
5. Tax and benefit interactions
Structured settlements can affect taxes and public benefits. Generally, periodic payments that stem from physical injury or sickness are often tax‑favored under federal tax rules; however, tax treatment can depend on the settlement’s nature and structure. Also consider:
- How annuity income affects means-tested benefits (Medicaid, SSI). Large lump sums can disrupt benefit eligibility unless structured carefully.
- Whether the annuity payments are secured by a qualified assignment or other mechanism that preserves tax treatment (these are federal issues; the IRS handles federal tax rules).
Address these matters with a tax professional and the child’s attorney before finalizing structure.
6. Example (hypothetical fact pattern)
Suppose you settle a car‑accident claim for $300,000 on behalf of a 7‑year‑old. The court may approve splitting the recovery: pay medical liens and legal fees, place $50,000 in a blocked account for immediate needs, and order purchase of a deferred annuity that pays monthly income starting at age 18 to cover education and living expenses. The judge signs an order naming a guardian of the estate and directing the insurer to purchase the annuity from a licensed life‑insurance company. The guardian must later file accountings to the probate court showing funds were used for the child’s benefit.
7. Documents and information you’ll likely need for court approval
- Settlement agreement and proposed order to court;
- Copies of medical records or a life care/needs assessment if injury affects future care costs;
- Financial information outlining current expenditures and expected future needs;
- Information about the annuity issuer (license, financial strength, product terms);
- Identification for the minor and proposed guardian fiduciary details.
8. How to find a Mississippi attorney who can help
Look for attorneys experienced in plaintiffs’ personal injury, probate, and guardianship matters. Ask whether the attorney has handled minor settlements and structured settlement/annuity purchases and whether they work with independent financial professionals who specialize in structured settlements.
Mississippi bar resources and local probate courts can provide referrals. See:
- Mississippi Bar Association (referrals and resources): https://www.msbar.org/
- Mississippi Courts (local probate court information): https://courts.ms.gov/
Summary
To set up an annuity for settlement funds held for a child in Mississippi, you will normally need to obtain court approval of the settlement or have a court‑appointed guardian of the estate arrange the purchase. The court will evaluate the child’s needs and approve the type and issuer of the annuity. Work with an attorney experienced in minor settlements and structured settlements, and consult a tax advisor about federal tax implications and how payments may affect public benefits.
Important: Courts and judges may follow slightly different procedures or require different documents. Start by consulting a Mississippi lawyer early in the process so the proposed annuity and court petition best protect the child’s interests.
Disclaimer: This article provides general information about Mississippi law and is not legal advice. It is not a substitute for consulting a licensed attorney who can advise you on the facts of your case.
Helpful Hints
- Hire a Mississippi attorney early — courts often expect counsel to prepare the petition for minor settlements.
- Bring a proposed court order with your petition that spells out how funds will be invested or paid.
- Consider a mix of liquidity and structured payments: keep a modest blocked account for immediate needs and buy an annuity for long‑term income.
- Choose an annuity issuer licensed in Mississippi and get full written terms, including survivor and inflation options.
- Discuss public‑benefit implications with counsel so the settlement doesn’t unintentionally make the child ineligible for Medicaid or SSI.
- Expect the court to require periodic accountings if a guardian manages the funds — maintain clear records and receipts.
- If the child has a severe, lifelong condition, present a life‑care plan or expert testimony to justify specialized payment terms.
- Ask about using a qualified assignment or other mechanisms if preserving favorable federal tax treatment is a goal (consult a tax professional).
- Confirm whether the judge will require a guardian ad litem or independent counsel for the minor — this is common in contested or significant settlements.