How to set up an annuity for settlement funds held for a child in Louisiana

Disclaimer: This article is educational only and is not legal advice. Laws change and every case is different. For advice about your specific situation, consult a Louisiana attorney or the court handling the child’s case.

Detailed answer: steps and legal considerations under Louisiana law

When a child in Louisiana receives settlement money (for example from a personal injury case, insurance claim, or wrongful death settlement), the child cannot usually control or spend those funds until a legally appointed guardian or tutor takes responsibility. To protect the child’s long‑term interests, parties commonly place settlement proceeds into an annuity or other long‑term income stream. Below are the principal steps, roles, and practical points to accomplish that under Louisiana practice.

1) Confirm whether court approval is required

In Louisiana it is common that any settlement on behalf of a minor or an incapacitated person will require court approval. The court reviews the proposed settlement to ensure it is fair and in the child’s best interest. Before you sign documents that permanently dispose of the child’s claim or move large settlement funds, check with the judge or the child’s attorney whether you need a petition and hearing to approve the compromise.

Where to look for the applicable rules: the Louisiana Legislature’s website (https://legis.la.gov) contains the state codes and practice rules. Local district court rules and the judge assigned to the case will set the exact procedure for submitting a proposed compromise for approval.

2) Consider who has legal authority to handle the funds

Possible roles include:

• Parent or custodian with limited authority (may need court permission for large settlements);
• Court‑appointed tutor (guardian of the person/property) who has legal authority to accept a settlement and manage funds for the child’s benefit;
• An appointed curator or conservator in unusual circumstances.

The court often requires the petition for approval to identify who will manage the funds and show that that person or entity is suitable.

3) Decide whether an annuity is the right vehicle

Annuities provide a predictable stream of payments and can restrict access to the principal. Typical reasons to use an annuity for a child’s settlement:

• To provide regular income for medical care, education, and living expenses over many years;
• To prevent the principal from being spent quickly;
• To shift investment and longevity risk to a licensed insurance company.

Other options include a blocked/custodial bank account (court‑ordered blocked account), a trust (if a trust is feasible and approved), or structured settlements (see below). Which is best depends on the size of the settlement, the child’s needs, and the court’s requirements.

4) Structured settlement annuities vs. purchased annuities

Two common approaches:

• Structured settlement: Often used in personal injury and wrongful death cases. The defendant (or insurer) funds a series of periodic payments through an annuity purchased from a life insurance company. Structured settlements can be tax‑advantaged and customized for the child’s needs (e.g., rising payments at certain ages, lump sums at milestones).
• Purchased annuity or retained asset: The settlement proceeds are paid to a guardian/tutor or placed into a blocked account and then used to purchase an annuity contract in the child’s name (or naming the guardian as payee). The court will generally review the insurer, the guaranteed terms, and the takeover procedure.

5) What the court will want to see

When seeking approval for an annuity or any disposition of a child’s settlement the court typically expects:

• A proposed judgment or order that explains the settlement, identifies the annuity company, and sets payment timing;
• Evidence that the annuity issuer is licensed and financially sound (insurance company financial ratings);
• A plan for who pays reasonable attorney fees and costs and how much they are;
• Provisions for the child’s current and reasonably foreseeable future needs (medical, special needs, education);
• Provisions for what happens if the insurance company becomes insolvent, or if the child dies before funds are exhausted;
• A recommendation by the child’s attorney or guardian ad litem (if appointed) that the arrangement is in the child’s best interest.

6) Common annuity design choices to present to the court

When choosing the annuity structure, consider:

• Payment schedule: monthly, quarterly, or annual;
• Start date: immediate or deferred (for example, begin some payments now for medical needs and larger payments when the child turns 18 or 21);
• Guaranteed period vs. life contingent payments (life contingent means payments continue for the beneficiary’s life; guaranteed period ensures payments for at least that many years even if beneficiary dies);
• Options for lump‑sum advances for education, housing, or medical emergencies;
• Survivorship or beneficiary designations (who receives remaining payments if the child dies);
• Inflation protection (cost‑of‑living adjustments) or stepping increases at certain ages;
• Issuer creditworthiness and state guaranty association coverage limits.

7) Procedural steps to implement the annuity

1. Work with the child’s attorney to prepare a petition or motion for approval of the compromise and proposed order describing the annuity terms and the funding method.
2. Provide insurer documentation, contract illustrations, and evidence of the insurer’s license and rating to the court.
3. Attend the hearing the court sets. The judge may appoint a guardian ad litem or request additional information. Once satisfied, the court issues an order approving the compromise and authorizing purchase of the annuity or distribution into the approved account.
4. Complete the annuity purchase consistent with the court order and provide the insurer’s contract and payment schedule to the court if required.
5. File any required accounting with the court (periodic reports on how funds were used, depending on local rules or judge’s order).

8) Tax and federal law considerations

Tax consequences of settlement payments and annuity payments are fact‑specific and governed by federal law. As a general point, portions of personal injury and certain physical injury settlement proceeds may not be taxable under federal law (see IRS rules). Structured settlement payments obtained for physical injury claims can receive favorable tax treatment in many cases. Discuss tax consequences with a CPA or tax attorney familiar with settlements and annuities.

9) What to watch out for

• Do not finalize transfers of large settlement funds without court approval when required; a later court order can be hard to obtain and could undo the transaction.
• Make sure any annuity company is licensed to do business in Louisiana; verify ratings and state guaranty coverage amounts.
• Be wary of high commission products or unnecessary riders; judges often scrutinize commissions and fees when approving settlements for minors.
• Plan for future modification if the child’s needs change (medical developments or special needs): trusts may offer more flexibility than a fixed annuity in some cases.

Helpful Hints

• Start early: preparing the documentation and insurer paperwork can take weeks; court calendars add more delay.
• Ask the court for a hearing date at the same time you file the approval petition; this speeds approval and gives certainty to the insurer.
• Obtain illustrations from multiple reputable insurance carriers and compare net payout, guarantees, and solvency ratings (A.M. Best, S&P, Moody’s).
• Consider a trust if the child has special needs—trusts can be tailored for government‑benefit protection and greater control.
• Keep complete records: court orders, annuity contracts, and periodic accountings. Courts may require follow‑up accounting or supervision.
• If the claim arises from a workplace or federal program, or involves veterans’ benefits, check whether additional federal rules apply.
• Before signing, have the child’s attorney, a financial advisor familiar with settlement planning, and a tax advisor review the plan.

Where to get help in Louisiana

If you need help:

• Contact the attorney who handled the underlying claim—most personal injury lawyers have experience structuring settlements for minors;
• Talk to a Louisiana attorney experienced in guardianship/tutorship and settlement approval procedures in the district where the minor’s case will be filed;
• Check the Louisiana Legislature site for applicable statutes and local district court rules: https://legis.la.gov;
• Contact your local district court clerk for procedural requirements and filing forms for a petition to approve compromise or to appoint a tutor/guardian.

Final note: Every case is different. Courts have broad discretion to approve or modify arrangements for a child’s funds. Working with an attorney who understands Louisiana practice will help you build the record the court needs and will increase the chance the judge will approve the annuity arrangement.