Disclaimer: This is general information, not legal advice. Consult a licensed Kansas attorney before making decisions about a child’s settlement funds.
Detailed Answer
When settlement funds are awarded for a minor child in Kansas, you have several safe ways to hold and manage those funds. One commonly used option is to convert a portion or all of the settlement into an annuity that will pay the child over time. The process involves court oversight, choosing the right annuity structure, and following Kansas rules for handling minors’ funds.
Who must approve the settlement and annuity?
Kansas courts generally must approve settlements for minors or situations where a guardian/conservator controls the funds. That approval ensures the settlement is in the child’s best interest and that any annuity or long‑term plan for the money is appropriate. The Kansas probate statutes (K.S.A., Chapter 59) govern guardianships, conservatorships, and many probate processes. For court procedures and forms, see the Kansas Judicial Branch resources at https://www.kscourts.org/ and the Kansas Legislature statutory resources at https://www.kslegislature.org/li/b2023_24/statute/ (search Chapter 59 for probate and guardianship rules).
Common legal pathways to place settlement funds in an annuity
- Court‑approved settlement for a minor: The court accepts the settlement and issues an order approving how funds will be used. The approval often specifically authorizes purchase of an annuity or establishes a trust with guaranteed payments.
- Conservatorship/Guardianship account: If a guardian or conservator is appointed, the court may allow that fiduciary to buy an annuity for the ward. The guardian must follow the court’s instructions and reporting requirements.
- Structured settlement (periodic payment settlement): For personal injury or wrongful death cases, the parties can use a structured settlement where an insurance company makes periodic payments under a qualified assignment. Structured settlements commonly use annuity contracts to fund payment streams and may provide tax advantages under federal law for personal injury amounts.
- Trust for the child: The court or the parties can create a trust (e.g., a guardianship trust) and fund it with an annuity or direct periodic payments. Trusts allow customized rules for distributions, age milestones, and protections against creditors.
Steps to set up an annuity for settlement funds in Kansas
- Confirm court approval is required: Ask your attorney whether the settlement for a minor requires a formal court hearing and order. Most Kansas cases involving minors will require court approval or oversight through probate/juvenile court.
- Decide on the funding vehicle: Determine whether you will purchase an immediate annuity, deferred annuity, or use a structured settlement mechanism. Consider whether you need guaranteed lifetime income, term payments, or a mix.
- Work with experienced professionals: Engage a Kansas attorney experienced in minor settlements and a reputable annuity/structured settlement broker or insurance company. The court will expect proposals that protect the child’s interests.
- Prepare the court application: Your attorney will prepare the petition for approval, describing the settlement terms, why an annuity is appropriate, which insurer will provide the annuity, and how the payments benefit the child. The court may appoint a guardian ad litem or independent counsel to represent the child’s interests.
- Obtain the court order: After a hearing (if required) the court issues an order authorizing the settlement and the specific disposition of funds, including purchase of an annuity or establishment of a trust. Keep certified copies of the order for the insurer and bank.
- Purchase the annuity and fund it according to the order: The insurer issues the annuity contract in the name required by the court (often the minor or the trust/guardian account). Make sure the annuity aligns with the court order’s terms (payment amounts, start date, beneficiary designations, and any limitations).
- Report to the court as required: Many Kansas courts require periodic accountings or reporting by guardians/conservators. Make sure you file any required reports and keep records of payments.
Key issues to evaluate when choosing an annuity
- Type of annuity: Immediate vs. deferred; fixed vs. indexed vs. variable. Fixed immediate annuities provide predictable payments; indexed/variable carry investment risk.
- Payment schedule: Monthly, quarterly, annual, or lump sums at milestones (e.g., age 18, 25, 30). Courts frequently prefer regular, documented payments that cover the child’s needs.
- Inflation and COLA options: Consider cost‑of‑living adjustments or escalating payment riders.
- Insurer credit quality: Check ratings (AM Best, Moody’s, S&P). Annuities depend on the insurer’s ability to pay over time.
- Tax considerations: Personal injury damages that compensate for physical injuries may be tax‑free under federal rules; other components (interest, punitive damages) may be taxable. Consult a tax professional for specifics.
- Irrevocability and flexibility: Many annuities are irrevocable and cannot be cashed in without court approval. Understand surrender charges, commutation options, and transfer restrictions.
- Beneficiary and change rules: Court orders may dictate who receives remaining benefits if the child dies; ensure the annuity contract matches the order.
Practical timeline and costs
Expect 4–12 weeks or longer from final settlement agreement to annuity start, depending on court schedules and insurer processing. Costs can include legal fees for the petition and hearing, costs for a guardian ad litem, structured settlement consulting fees, and any annuity commissions or administrative charges. Courts scrutinize fees to protect the child’s funds.
Where Kansas law matters
Kansas’s probate and guardianship statutes under K.S.A. Chapter 59 govern who may act for a minor, how courts approve settlements, and reporting requirements. Use the Kansas Legislature site to review chapter contents: https://www.kslegislature.org/li/b2023_24/statute/ (search within Chapter 59). For court procedures, forms, and local practice, see the Kansas Judicial Branch: https://www.kscourts.org/.
Helpful Hints
- Hire a Kansas attorney who handles minors’ settlements and structured settlements regularly.
- Ask the court‑appointed guardian ad litem or an independent attorney to evaluate annuity proposals for the child’s best interest.
- Get at least two annuity proposals from different insurers and compare guarantees, riders, and ratings.
- Clarify tax treatment early—identify which parts of the settlement are taxable and which may be tax‑exempt.
- Make sure court orders and annuity contracts match exactly on beneficiaries, payment timing, and restrictions.
- Keep meticulous records and be prepared to file accountings if you are a guardian or conservator.
- Consider a trust if you want more control over distribution timing or contingencies (e.g., funds for education only).
- Be cautious about factoring: avoid selling future payments unless the court specifically allows a transfer or commutation after a full review.
If you want next steps: gather the settlement agreement, proposed annuity quotes, and any draft court petitions and consult a Kansas probate or personal injury attorney to prepare the court filing. They will guide you through the hearing, approval, and annuity purchase so the child’s funds remain protected.