Overview — What usually must happen in West Virginia

When settlement money is intended for a minor, West Virginia courts typically require a court-supervised process to protect the child’s interests before funds can be spent, transferred, or invested. That often means a judge must review and approve the settlement or the creation of any fiduciary account (a conservatorship, guardianship, trust, or a court-approved annuity purchase). To find West Virginia statutes and local rules, start at the West Virginia Code site: https://code.wvlegislature.gov/ and the West Virginia Judiciary website: https://www.courtswv.gov/.

Step-by-step: How to set up an annuity for settlement funds held for a child

1. Identify the type of arrangement the parties want

   Decide whether the settlement will be paid as a structured settlement (periodic payments purchased by the defendant or its insurer) or whether the settlement will be paid in a lump sum to a court-supervised fiduciary who will buy an annuity. Structured settlements and immediate annuities differ in flexibility, tax treatment, and how they are set up:

   • Structured settlement (periodic payments funded by a qualified assignment) — often used for bodily-injury claims. It can be tax-advantaged if arranged correctly and approved by the parties and the court.
   • Lump-sum placed into a conservatorship/guardianship or trust and then used to buy an annuity — gives the fiduciary direct control over purchase choices but requires court oversight.

2. Obtain court approval or supervise by the appropriate court

   West Virginia courts typically must approve settlements involving minors or the investment of minor’s funds. A parent, guardian, or attorney usually files a petition asking the circuit court (probate/conservatorship division) to approve the settlement terms or the purchase of an annuity. The petition packet commonly includes the settlement agreement, proposed annuity contract or proposal, a statement of the child’s needs, attorney fee requests, and a proposed order. The court may appoint a guardian ad litem or require notice to interested parties.

3. Choose the fiduciary vehicle that best protects the child

   Common vehicles:

   • Conservatorship/guardianship (court-run fiduciary) — the court supervises the fiduciary who manages and invests funds and is generally required if there is no other agreed-upon plan.
   • Trust (testamentary, inter vivos, or minor’s trust) — more flexible rules, often better for long-term planning and conditions.
   • Custodial account (UTMA/UGMA) — gives the custodian control until statutory age (vary by state; check West Virginia provisions) but offers less protection than a trust for large settlements.

   For sizable settlements, many families prefer a trust with court approval or a conservatorship that then purchases an annuity under court order.

4. Select the annuity product and provider

   Decide the annuity type:

   • Immediate annuity — converts a lump sum into an immediate stream of payments.
   • Deferred annuity — delays payments until a future date; can be useful for funding education or needs at a later age.
   • Life-contingent versus period-certain payments — life-contingent pays for the annuitant’s life; period-certain guarantees payments for a set period even if the annuitant dies.

   When selecting a company, look for licensed life insurers in West Virginia and check financial strength ratings (AM Best, S&P). The chosen insurer must be willing to issue the annuity either directly to the conservatorship/trust or to the child represented by the fiduciary and the court.

5. Prepare filings and attend the court hearing

   File the petition and exhibits asking the circuit court to approve the settlement and the annuity purchase. The court will review whether the arrangement is in the child’s best interest, including whether attorney fees are reasonable and the financing terms are fair. Expect the court to require documentation showing how the annuity payment schedule matches the child’s needs.

6. Close the transaction under court supervision

   After court approval, the defendant/insurer or payer will transfer the money or arrange a qualified assignment to the annuity provider. The Court’s order will direct who signs, who receives notices, and how proceeds are handled. Keep a full administrative record for the court and future reporting requirements.

7. Ongoing supervision and record-keeping

   The fiduciary will be accountable to the court for handling the child’s funds, making required filings (accountings), and using payments for the child’s benefit. If circumstances change, petition the court to modify the plan rather than unilaterally changing the annuity.

Key legal and tax points to watch

• Court approval: Most WV judges require formal approval when settling a minor’s claim or disbursing large sums to a minor’s fiduciary. Use the West Virginia Code search to locate applicable guardianship and probate provisions: https://code.wvlegislature.gov/.
• Tax treatment: Personal-injury damages and related structured settlement periodic payments generally are not taxable under federal law when they represent damages for physical injury or sickness. For federal tax rules, see Internal Revenue Code provisions and IRS guidance; discuss tax consequences with a tax advisor or attorney.
• Qualified assignment: If the other side funds a structured settlement, a qualified assignment (under federal rules used in structured settlements) may be used so the payor can transfer future payment obligations to an annuity issuer. Ask counsel about the mechanics and tax consequences of a qualified assignment.
• Special needs: If the child has disabilities, consider a properly drafted special needs trust rather than a direct annuity to protect means-tested benefits (Medicaid/SSI).

Hypothetical example

Suppose a 10-year-old receives a $500,000 personal-injury settlement. The parents and insurer agree that steady lifetime support is best. The parties petition the West Virginia circuit court to approve a structured settlement consisting of:

• $25,000 per year for education through age 22;
• $20,000 per year for living expenses until age 30;
• $40,000 per year thereafter for life.

The court reviews the proposal, the annuity vendor’s quote, the parent’s request for attorney fees, and the children’s needs. After approval, the insurer purchases an annuity contract from a licensed life company that issues periodic payments per the court order to the court-appointed conservator or directly as ordered by the court.

Helpful Hints

• Work with a West Virginia attorney experienced in minors’ settlements, guardianship/conservatorship proceedings, and structured settlements.
• Obtain competing annuity quotes and check insurer financial strength.
• Ask the court whether a guardian ad litem or independent counsel is required for the child.
• Consider whether a trust (including a special needs trust) better protects benefits and provides flexibility than an annuity alone.
• Get written actuarial illustrations showing inflation assumptions, guaranteed payments, and survivor provisions.
• Understand that annuities are often hard to change or cash out later; confirm modification or commutation rules before purchase.
• Keep thorough records and file required accountings with the court on time.
• If tax or benefits questions arise, consult a tax advisor and a benefits planner familiar with West Virginia public benefits rules.