FastCounsel

This overview explains how to place settlement funds for a child into an annuity under Pennsylvania practice. It assumes no prior legal knowledge. It explains the common legal steps, practical choices, and protections courts and families use to make sure a child’s money is safe, accessible for needed expenses, and managed responsibly.

Does a Pennsylvania court usually need to approve a child’s settlement?

Yes. When a plaintiff is a minor, Pennsylvania courts commonly require judicial review or approval before settlement funds are released to a minor or to a guardian for the minor’s benefit. The court’s role is to protect the child’s interests, decide whether the settlement is fair, and approve the method for holding or investing the money (for example, a court-ordered annuity or blocked account). If a guardian of the estate is involved, the Court of Common Pleas usually supervises the guardian’s handling of settlement proceeds.

Major options for holding a minor’s settlement

• Structured settlement annuity: The insurer or defendant buys an annuity that pays the child (or guardian) specified periodic amounts. A structured settlement can provide guaranteed income and may reduce the risk that a lump sum is quickly spent.
• Lump-sum placed in a court-blocked or restricted account: The court orders funds deposited into a special bank account that requires court permission to withdraw principal.
• Guardian or conservatorship management: A guardian or guardian of the estate is appointed and manages funds for the minor under court supervision. The guardian can purchase an annuity on the minor’s behalf, subject to court approval.
• Custodial accounts or UTMA-like arrangements: If applicable, funds can be placed with a custodian under state custodial transfer law until the child reaches the statutory age to receive property outright. Pennsylvania has mechanisms for custodial transfers controlled by statute and court rules.
• Special needs trust: If the child has disabilities and receives public benefits, a special needs trust may be necessary to protect benefits while permitting payments for additional needs.

Step-by-step: How to set up an annuity for settlement funds in Pennsylvania

1. Start with a lawyer who handles minor settlements

Hire or consult a Pennsylvania attorney experienced in minor settlements, guardianship, and structured settlements. The attorney will advise on whether the court requires a specific procedure, whether a guardian must be appointed, and what documentation the court expects before approving an annuity purchase.

2. Decide whether a structured settlement annuity fits the child’s needs

Consider goals: long-term security, tuition payments, periodic care costs, medical needs, or immediate access. Structured settlements provide predictable periodic payments. If you need flexibility or larger near-term funds, a lump-sum in a restricted account might be better. For disabled children on public benefits, talk with a knowledgeable attorney about special needs planning before selecting an annuity.

3. Negotiate settlement language to allow an annuity

Settlement documents should state how the defendant/insurer will transfer funds or fund an annuity and should reserve court approval steps needed for minor settlements. If the insurer offers to buy an annuity directly, the settlement should specify the timing, payee, and whether the annuity will be assigned directly to the payee or purchased via a qualified assignment (often used in structured settlements).

4. Obtain court approval or guardian authority

File the settlement with the appropriate Pennsylvania court so a judge can review and approve the settlement and the proposed method of holding funds (including an annuity purchase). If a guardian or guardian of the estate will act for the child, the court may first need to appoint that guardian and authorize the transaction. The court will generally want evidence that the annuity terms serve the child’s best interest.

5. Choose the annuity product and reliable issuer

Work with the attorney or a structured settlement broker to select the annuity type: immediate or deferred; fixed or indexed; life-contingent or period certain. Prioritize financially strong insurance companies with high ratings (A.M. Best, S&P, Moody’s). Confirm the annuity’s payment schedule and beneficiary designations and ensure the annuity contract satisfies the court’s order.

6. Complete purchase and file proof with the court

After the insurer issues the annuity contract, file the annuity contract and related documents with the court as part of the final approval package. The court will confirm that the purchase matches the approved plan and that funds will be used for the child’s benefit.

7. Ongoing administration and reporting

If a guardian manages the annuity, expect periodic accountings and court reports. If payments go directly from the insurance company to the child or a guardian, retain all records of receipts and expenditures. The court may require continued oversight until the child reaches the age the court specifies or the annuity ends.

Tax and federal considerations (high level)

Structured settlement periodic payments tied to physical injury claims may have favorable tax treatment under federal tax law (consult a tax advisor). Purchasing an annuity through a qualified assignment has federal rules that apply to defendants, insurers, and assignment companies. For tax-specific questions, consult a tax professional or attorney.

Common pitfalls to avoid

• Failing to obtain court approval before disbursing funds to a minor.
• Choosing an annuity issuer without checking financial strength and contract details (surrender charges, inflation protection, or beneficiary rules).
• Overlooking public benefits rules if the child receives Medicaid or SSI—this can disqualify benefits unless you plan accordingly.
• Letting funds sit in an account without court-ordered protections that prevent misuse.
• Accepting a structured settlement that lacks the flexibility you will need for foreseeable expenses (education, medical care).

Key Pennsylvania resources (general):

• Pennsylvania Courts (Unified Judicial System) — court forms and local court information about guardianship and settlement approval.
• Pennsylvania Insurance Department — consumer information about annuities and insurance company regulation.
• Pennsylvania General Assembly — searchable statutory law and legislative resources.

Disclaimer: This article explains general Pennsylvania practice and is for educational purposes only. It is not legal advice. You should consult a licensed Pennsylvania attorney before making legal decisions about a minor’s settlement or purchasing an annuity.