Quick answer

If you receive a settlement for a minor in Arizona and want regular, protected payments instead of a lump sum, the common solution is a structured settlement annuity or a court-approved investment arrangement. To do this you will usually need court approval (or the court’s confirmation of a proposed arrangement), the insurer or defendant must agree to buy an annuity from a licensed issuer, and the court must be satisfied the arrangement protects the child’s interests. Many cases require a guardian ad litem or a probate filing so the judge can approve the compromise and the proposed annuity.

Detailed answer — step-by-step under Arizona law

1. Understand the legal framework

Arizona handles protections for minors’ settlements within its probate and guardianship statutes (Title 14 of the Arizona Revised Statutes). Matters involving a minor’s claim typically require court oversight so the judge can approve the settlement and any method used to hold or distribute the money. See Arizona Revised Statutes, Title 14 (Probate and protected persons): https://www.azleg.gov/arsDetail/?title=14.

2. Choose the right structure for the funds

Common methods for managing settlement funds for a minor in Arizona:

• Structured settlement annuity: The defendant/insurer purchases an annuity from a life/annuity company that pays the minor (or the minor’s guardian/trust) according to the agreed schedule. Annuities can provide lifetime or term payments and may be designed to increase or pay specific sums at milestones (e.g., college).
• Blocked or restricted bank account: A court may order settlement proceeds deposited into a blocked account at a bank with restrictions on withdrawals until a certain age or court order.
• Guardianship/conservatorship (guardian of the estate): If the settlement is large or ongoing management is required, the court may appoint a guardian of the minor’s estate (probate process) to manage the funds under court supervision.
• Minor’s trust: The parties can propose a trust (including a special needs trust if applicable) with a trustee to manage funds for the child under court approval.

3. Get court approval of the settlement and annuity

Arizona courts generally require that settlements for minors be reviewed to ensure they are fair and in the child’s best interests. The exact process varies with the county and the court, but typical steps include:

1. File a petition for approval of compromise of claim or settlement in the appropriate probate or juvenile court (or include the request in the civil case paperwork if local rules allow).
2. Provide the judge with the proposed settlement document, the proposed annuity contract or trust documents, and a proposed order approving the arrangement.
3. The court may require appointment of a guardian ad litem or counsel to represent the minor’s interests and may hold a hearing before approving the settlement.
4. After approval, the court signs an order authorizing the settlement and specifying how the funds are to be paid and protected.

Because these procedures come from Arizona’s probate and guardianship law, review Title 14 of the Arizona Revised Statutes for guidance: https://www.azleg.gov/arsDetail/?title=14.

4. Design the annuity

Key design choices when using a structured settlement annuity:

• Payment schedule: monthly, yearly, milestone payments, lump sums at certain ages.
• Life contingency: payments can be payable to the child for life or for a fixed term.
• Contingent beneficiary: decide who receives remaining payments if the child dies.
• Cost and creditworthiness: the defendant/insurer typically purchases the annuity from a life company licensed in Arizona. Confirm the issuer is licensed—Arizona Department of Insurance: https://insurance.az.gov/.
• Federal tax considerations: portions of personal injury settlements that compensate for physical injury or sickness are generally tax-free under federal law, but structured settlement taxation can be complex—consult tax counsel.

5. Implementation and court follow-through

After court approval, the defendant/insurer pays the settlement amount to the annuity issuer or into the approved trust/account. The court’s order will usually state who will receive payments and any reporting or accounting requirements for the guardian or trustee. If the court appointed a guardian of the estate, that guardian may need to provide periodic accountings to the court under Arizona probate rules.

6. Special situations

• Large settlements: The court is more likely to require formal guardianship or conservatorship if the settlement is large.
• Disabled child: Consider a special needs trust to preserve eligibility for government benefits; the trust must comply with federal and state rules.
• Insurance company objections or out-of-state insurers: The insurer must generally be willing to purchase the annuity; the annuity issuer must be licensed to sell annuities in Arizona.

7. Who should you involve?

Required or recommended professionals:

• A lawyer experienced in minor settlements and probate filings in Arizona to draft petitions and proposed orders.
• Guardian ad litem or court-appointed counsel for the minor if the court requires one.
• An insurance/annuity company that issues structured settlement annuities and is licensed in Arizona.
• Tax advisor and, if needed, an estate planning attorney for trust or conservatorship matters.

8. Typical documents the court expects

• Petition for approval of settlement/compromise of minor’s claim.
• Settlement agreement.
• Proposed annuity contract or trust agreement (with payment schedule).
• Proposed court order approving the settlement and directing disposition of proceeds.
• Guardian ad litem report (if appointed) or legal guardian’s declaration describing why the settlement/annuity is in the minor’s best interest.

Helpful hints

• Begin with an attorney: Local probate and civil rules vary by county and judge. An Arizona attorney can file the correct petition and proposed order to avoid delays.
• Ask the court how it prefers to receive a proposed annuity: some courts need the annuity contract before approval; others accept a proposed schedule with a later filing.
• Confirm the annuity issuer’s licensing and financial strength; check the Arizona Department of Insurance: https://insurance.az.gov/.
• Consider a trust for large settlements or if public benefits might be needed later.
• Expect the court to require accounting if a guardian of the estate manages the funds; plan for those costs in the settlement budget.
• If the child has a disability, explore a supplemental needs trust; improper handling can jeopardize benefits.
• Keep records and copies of court orders and annuity contracts—these documents guide future payments and address disputes.
• Ask for a sample court order from the judge’s clerk or the local probate court website to confirm form and required language.