How to arrange periodic payments and protective accounts for a minor’s settlement in Colorado

This FAQ-style guide explains how parents, guardians, or representatives commonly set up annuities or other protected payment arrangements when settlement funds are payable for a Colorado minor. It describes typical legal steps, practical choices, and things to watch for so you can discuss options knowledgeably with an attorney, financial advisor, and the court. This is general information only and not legal advice.

Quick overview

When a child receives settlement money (for example, in a personal-injury case or other claim), you cannot simply place a large sum in a child’s name and leave it there without steps that protect the child’s legal and financial interests. Common protective solutions include:

Structured settlement (periodic payments paid by an annuity purchased from an insurance company)
Conservatorship (court-supervised management of the child’s property)
Custodial accounts under Colorado’s custodial/transfer-to-minor statutes (UGMA/UTMA-style accounts, if applicable)
Blocked or court-ordered bank accounts

Detailed answer — step-by-step under Colorado practice

1. Talk to a lawyer early

Start by consulting a Colorado attorney experienced with minor settlements, guardianship/conservatorship, and structured settlements. The attorney will explain required court filings, guardian-ad-litem roles, and the best protective device for the child’s situation. If the case arises from a claim for physical injury, tax treatment of structured payments can differ from other types of settlements.

2. Decide the basic structure of the payout

Common choices:

Structured settlement (periodic payment stream). The defendant or insurer purchases an annuity from an insurance company to make scheduled payments to the child over time (for example, monthly or at certain milestone ages).
Lump sum placed in a conservatorship or blocked account. The court appoints a conservator or orders a bank to block the funds and require court approval for withdrawals.
Custodial account (when allowed). A parent or custodian holds funds under Colorado’s custodial-transfer rules until the statutory termination age.

3. If you want an annuity (structured settlement): how it usually works

Settlement language identifies that the defendant/insurer will fund a series of periodic payments rather than (or in addition to) a lump sum.
The insurer typically buys an annuity contract from a licensed life/annuity company to secure those periodic payments. That annuity is the issuer’s guarantee of payment, and the insurer or plaintiff (depending on wording) funds it.
The settlement must describe who receives payments. For a minor, the court will want clarity on whether payments go directly to the child, to a guardian/conservator, or to a trustee for the child.
The court frequently must approve the settlement or the annuity arrangement when the recipient is a minor. The court protects the minor’s interest and may require a guardian ad litem or other independent review.

4. Court involvement in Colorado

Because a minor cannot legally manage significant assets, courts in Colorado typically require approval for settlements that compromise a minor’s claim or shift substantial assets. Expect the following:

Filing for court approval of the settlement or creation of a conservatorship or guardianship over the minor’s estate.
Appointment of a guardian ad litem or counsel to review whether the settlement is fair and in the child’s best interest.
Documentation showing the proposed annuity terms, identity and licensing of the annuity issuer, and a plan for management of any residual lump-sum amounts.

For Colorado court resources and local forms, see the Colorado Judicial Branch self-help information and district court contacts: https://www.courts.state.co.us/

5. Conservatorship, custodial account, or trustee: pick the correct protective device

Which option is right depends on the child’s needs and the settlement size:

Conservatorship (probate court oversight): used when funds are large or you need ongoing court supervision of investments and distributions.
Custodial account (statutory custodial transfers): may be simpler for smaller sums; the custodian manages funds until the statutory age at which the child gains control.
Trust: if you need more control and custom distribution rules (e.g., to age 25 or to pay for education/medical expenses), a trust can be funded with either lump sums or periodic payments from an annuity.

6. Choosing the annuity issuer and contract terms

Key considerations:

Use an insurer licensed to sell annuities in Colorado. You can confirm licensing with the Colorado Division of Insurance: https://doi.colorado.gov/
Decide fixed vs. indexed or variable annuity features. Simpler, conservative fixed annuities are common for settlement payments.
Name the proper payee in the annuity contract. For a minor, the contract often names the child as beneficiary but directs payments to a conservator, trustee, or custodian until the child reaches the appropriate age.
Confirm transferability rules. Some annuities allow only the original payee to receive payments and limit assignment or factoring of payments (important for preventing improper sale of future payments).
Make sure the settlement documents and court order match the annuity contract precisely so there are no conflicts later when payments begin.

7. Tax and benefit consequences

Tax treatment depends on the nature of the claim:

Physical injury settlements often exclude damages for personal physical injuries from federal income tax under federal law; structured settlements funded for physical injury claims can enjoy tax-free periodic payments. Consult a tax professional about your circumstances. See general IRS guidance on settlements and structured settlements: https://www.irs.gov/
Periodic payments can affect means-tested benefits (Medicaid, SSI). If the child receives or may receive government benefits, check eligibility rules and how an annuity or conservatorship distributions will interact with them.

8. Finalizing and monitoring the arrangement

Once the court approves the settlement and the annuity is in place:

Keep copies of the court order, annuity contract, payment schedule, and correspondence with the insurer.
File any periodic accountings required by the court (if a conservatorship exists).
Review the annuity issuer’s solvency and reputation; maintain contact information for the insurer and the paying agent.

Practical checklist (step-by-step)

Hire a Colorado attorney experienced with minor settlements and structured settlements.
Decide on periodic payments (structured settlement) or a protected lump-sum device (conservatorship, trust, custodial account).
Get a guardian ad litem or independent review if the court requests it.
Require the defendant/insurer to fund an annuity only from a licensed Colorado-authorized insurer. Confirm licensing at the Colorado Division of Insurance: https://doi.colorado.gov/
Prepare and file the court petition and proposed order showing how payments will be handled for the child.
After court approval, execute the annuity contract and confirm start date/recipient designation match the court order.
Keep records and file any required court accountings.

Hypothetical example

Suppose a 10-year-old in Colorado receives a $400,000 settlement for a personal-injury claim. The parties agree the insurer will purchase an annuity that pays $2,000 per month for life, plus $50,000 at the child’s 25th birthday. The parents petition the district court to approve the settlement and to name a conservator and a guardian ad litem. The court reviews the annuity contract, confirms the insurer is authorized in Colorado, approves the settlement, and issues an order directing the insurer to buy the annuity for the child with payments made to the conservator until the child reaches the age specified. The conservator must make periodic accountings to the court. This approach protects the child from having a single large lump sum under parental control while providing predictable income and a future lump payment.

Helpful hints

Engage counsel early. Courts expect proper petitions and documentation before approving annuities for minors.
Confirm insurer licensing with the Colorado Division of Insurance: https://doi.colorado.gov/
Ask for the annuity contract draft before finalizing the settlement so the court can review precise payment language.
Consider a trust if you want custom control of distributions (education, medical, special needs) beyond the standard custodial age.
Check potential effects on Medicaid or SSI with an elder/benefits attorney or social services; structured payments and trusts can affect eligibility differently.
Be careful about selling (factoring) future payments. Many structured settlement arrangements restrict the sale of future payments and transfers may require court approval.
Keep excellent records and comply with any court accounting and reporting rules if a conservator is appointed.
Use a licensed structured settlement consultant if needed to help compare annuity offers and confirm the solidity of the issuing company.

Where to find more Colorado-specific resources

Colorado Judicial Branch (forms and self-help information): https://www.courts.state.co.us/
Colorado Division of Insurance (verify insurer licensing): https://doi.colorado.gov/
Colorado statutes and searchable laws: https://leg.colorado.gov/statutes

Disclaimer: This article provides general information about common approaches to protecting settlement funds for a minor in Colorado. It is not legal advice and does not create an attorney-client relationship. Laws change and every situation differs. Consult a Colorado-licensed attorney and a qualified financial or tax advisor to get advice tailored to your facts.