Setting Up an Annuity for Settlement Funds Held for a Child — What Oklahoma Parents and Guardians Need to Know

Disclaimer: This is educational information only and not legal advice. Laws change and every situation is different. Talk with an Oklahoma attorney experienced in minors’ settlements or guardianship before you act.

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

If you have received a settlement on behalf of a minor in Oklahoma, the court will usually require a plan that protects the child’s money. One common approach is to use an annuity (a stream of future payments) to hold and pay the child’s award over time. Below are the typical legal and practical steps to set up that arrangement in Oklahoma, plus the choices you will face.

1. Confirm whether the settlement must be approved by an Oklahoma court

Most settlements for a minor’s personal injury or other claims require court approval or court supervision before funds can be distributed. Courts approve settlements to ensure the resolution is fair and that the child’s money is protected. For Oklahoma statutes and court rules affecting guardianships, estates, and court-supervised settlements, see the Oklahoma Legislature site: https://www.oklegislature.gov/.

2. Decide how the funds will be held and paid

Common options include:

• Structured settlement (annuity-funded periodic payments): The defendant or insurer funds an annuity that makes scheduled payments to the child or to a guardian. Structured settlements are often used in personal injury cases.
• Blocked or restricted bank account: The court orders the settlement deposited in an account where withdrawals require court permission.
• Guardianship/conservatorship account: A court-appointed guardian or conservator manages the funds until the child reaches majority (or as ordered by the court).
• Trust: A trust (often a minor’s or special needs trust) can be created and funded with a lump sum or annuity income, with a trustee managing distributions per the trust terms and court approval if required.

3. If you want an annuity, decide between a direct structured settlement or purchasing an annuity inside a court-approved trust or guardianship

There are two common processes:

• Structured settlement paid directly by the defendant/insurer: Settlement paperwork specifies periodic payments to the child. The defendant’s insurer buys an annuity from a life/annuity company that will make those payments. This can provide tax advantages for personal-injury settlements and avoids placing a large lump-sum in the child’s control.
• Lump sum to court-supervised trust or blocked account, then buy an annuity: The court permits payment of the settlement into a guardianship account or trust, and the guardian or trustee uses those funds to purchase an annuity to provide future payments. This approach can be used where a structured settlement through the defendant is not available.

4. Tax and benefit considerations

Structured settlement periodic payments originating from personal injury awards are often received tax-free under federal law (see Internal Revenue Code and IRS guidance on structured settlements). For general IRS information on structured settlements, see: https://www.irs.gov/taxtopics/tc420. Be careful with interest earned on funds while held in a bank account — that interest may be taxable.

5. Prepare and submit a court proposal

If the court must approve the settlement or the funding mechanism, you will typically submit a proposed order that explains:

• The total settlement and what portion (if any) will be paid as periodic payments vs. lump sum.
• Who will receive payments and at what ages or intervals.
• Which annuity company will be used, and evidence that the company is licensed and financially sound.
• Any fees, commissions, or third-party consultants and why they are reasonable.
• How the arrangement protects the child’s best interests.

The court may require a hearing, notice to interested parties, and appointment of an attorney for the child or a guardian ad litem to review the proposal.

6. Buy the annuity from a licensed insurer and get court confirmation

Once the court approves, the defendant/insurer or the guardianship/trust will purchase the annuity. Make sure the annuity contract matches the approved payment schedule and that the insurance company is licensed to sell annuities in Oklahoma. It is wise to obtain written confirmation of the annuity contract and show that to the court so the judge can enter final approval or an order directing payment per the annuity.

7. Ongoing accounting and court oversight

If the court retains jurisdiction (common when a guardian or conservator is involved), the guardian or trustee will usually need to file periodic accountings showing how funds are managed and that payments have been made per the court order.

Practical checklist

1. Talk with an Oklahoma attorney experienced in minors’ settlements and guardianship.
2. Decide whether a structured settlement (annuity paid by insurer) or an annuity purchased inside a trust/guardianship is better for the child’s needs.
3. Obtain annuity quotes from reputable, licensed insurers and check ratings.
4. Prepare a court filing explaining the proposed funding and protections for the child. Expect a hearing and possible appointment of counsel for the child.
5. Complete the annuity purchase and submit the final contract to the court for approval and entry of an order reflecting the arrangement.
6. Follow any reporting or accounting requirements the court imposes.

Helpful Hints

• Ask the court whether it prefers a direct structured settlement (insurer-funded annuity) or a court-supervised trust/guardianship approach — preferences vary by judge and by case type.
• Obtain multiple annuity quotes. Small differences in payout rates can substantially change long-term income for the child.
• Check the annuity issuer’s financial strength (e.g., AM Best rating) and confirm the company is licensed to do business in Oklahoma.
• Carefully review any fees for settlement consultants or intermediaries. The court will often scrutinize fees and may require disclosure in the filing.
• Consider whether the child may qualify for public benefits (Medicaid, SSI). Structured payments or trust terms can be drafted to avoid disqualifying lump-sum distributions; an attorney familiar with public-benefits planning can help.
• Keep clear records and file accountings on time if you are a guardian or trustee — failure to account can lead to court enforcement actions.
• If someone later seeks to sell or transfer future structured settlement payments, Oklahoma courts generally require review and approval of such transfers to protect the payee; get legal advice before agreeing to any buyout.

Where to get help in Oklahoma

• Oklahoma Legislature — statutes and legal authorities: https://www.oklegislature.gov/
• IRS guidance on structured settlements and tax treatment: https://www.irs.gov/taxtopics/tc420
• Consult an Oklahoma attorney with experience in minors’ settlements, guardianships, or trust planning — an attorney can prepare the court filings and help you navigate the approval process.

Setting up an annuity for a child’s settlement funds is a common and effective way to protect money for a minor’s future needs, but it involves courtroom steps, documentation, and careful selection of the funding vehicle. Start by consulting an Oklahoma lawyer so you can present a court-friendly plan that protects the child and meets legal requirements.