Detailed Answer

Summary: When settlement money belongs to a child in Nebraska, you usually cannot simply spend or invest it as you would for an adult. Nebraska law and Nebraska courts expect courts, guardians, or custodians to protect the child’s interests. The usual ways to preserve or distribute settlement funds for a child include a court-approved structured settlement (annuity), a custodial account under the Uniform Transfers to Minors Act (UTMA), a blocked/bank account approved by the court, or a trust (including a special needs trust if the child receives public benefits). You will almost always need court approval or a formal legal vehicle to pay an annuity using settlement proceeds for a minor.

Step-by-step process to set up an annuity for a child’s settlement funds in Nebraska

1. Confirm who legally holds the funds. Common scenarios: a) the payer sent a lump-sum to a parent or guardian; b) a court or insurer holds funds pending approval; or c) settlement proceeds remain with plaintiff counsel in trust. If you are not the court-appointed guardian or conservator, you will usually need the court’s permission to move the funds into an annuity.
2. Determine the appropriate legal vehicle.
   • Court-approved structured settlement: For many personal-injury settlements, the parties arrange a structured settlement and submit documentation to the court for approval. The court evaluates whether the arrangement is in the child’s best interest.
   • Guardianship/conservatorship: If a guardian or conservator has been appointed over the child’s estate, that person may petition the probate/county court to approve purchasing an annuity on the child’s behalf.
   • UTMA/custodial account: For smaller settlements, a custodial account under Nebraska’s version of the Uniform Transfers to Minors Act may be an option. The custodian manages funds for the child until the statutory age or until court direction.
   • Trust: If you need more control or if the child receives public benefits, a trust (including a special needs trust) may be the better option. Trusts often require court approval when funded with a minor’s settlement funds.
3. Prepare the paperwork for the court. If the law requires court approval (typical for minor’s settlements), you or your attorney will file a petition to approve the compromise or to authorize the guardian/conservator to purchase an annuity. The petition packet commonly includes:
   • The settlement agreement and release;
   • The proposed annuity contract or quote from a licensed insurer;
   • Medical records and a damages analysis (to show settlement fairness and child’s future needs);
   • A proposed plan for managing funds not paid in the annuity; and
   • Attorney fee documentation and any brokerage or broker/annuity fees (which courts review for reasonableness).
4. Choose a suitable annuity and a licensed insurer. If the court approves an annuity, purchase it from an insurer licensed to do business in Nebraska and experienced with structured settlements. The insurer should issue a contract showing payment timing and amounts. Courts will want to see the exact contract before they finalize approval.
5. Request court hearing and guardian ad litem (if required). For minor-compromise proceedings, Nebraska courts often require notice to the child (through a guardian ad litem when necessary), interested parties, and a hearing so the judge can determine whether the settlement and annuity are in the child’s best interest. The court may ask for additional evidence or adjustments to the payment schedule.
6. Close the transaction under court direction. After approval, the settlement check is typically endorsed per the court order. Funds either purchase the annuity directly from the insurer or are disbursed as the court orders. The court may retain continuing jurisdiction to supervise larger settlements or trusts.
7. Track reporting, taxes, and ongoing management. Maintain records and file any required probate/guardian accounting with the court. Be aware of tax consequences: structured settlement periodic payments from a physical injury settlement are often treated favorably under federal tax rules, but you should consult a tax advisor about your situation.

Relevant Nebraska law and resources

Nebraska handles minor-compromise and guardianship matters within its probate and juvenile processes. See Nebraska’s probate/guardianship statutory chapter for the controlling rules and procedures:

• Nebraska Revised Statutes, Chapter 30 (Probate, guardianship and related proceedings)
• Nebraska Judicial Branch (court locations, forms, and procedures)
• Nebraska Department of Insurance (insurer licensing and consumer information)

When an annuity is often the right choice

Courts and parents often prefer an annuity when the child needs a reliable stream of income, when the settlement is large enough that a structured payment better protects long-term needs, or when spending discipline is essential. An annuity can protect funds from premature depletion and may coordinate with trust distributions or public benefits. However, annuities are typically irrevocable and can be complex, so weigh benefits and drawbacks with counsel.

How an attorney helps

An attorney familiar with Nebraska minor-compromise and guardianship procedures can:

• Prepare and file the petition for court approval;
• Draft and negotiate a structured-settlement agreement and annuity documentation;
• Work with an independent life/annuity broker or insurer experienced in structured settlements;
• Advise on tax, public-benefit, and trust planning implications; and
• Attend the court hearing and advocate for the child’s best interest.

Disclaimer

This article is for general information only and is not legal advice. It does not create an attorney-client relationship. Laws change and the facts of your situation matter. For advice tailored to your circumstances, consult a licensed Nebraska attorney experienced in minor settlements, guardianship, and structured settlements.

Helpful Hints

• Start early: court approval and annuity underwriting take time. Begin the process well before any payment deadlines.
• Keep thorough documentation: save settlement agreements, medical records, annuity quotes, and court filings.
• Ask the court about fee approval: attorney fees and annuity broker fees usually need explicit court approval when charged against a minor’s settlement.
• Check insurer licensing: use an insurer licensed in Nebraska; the Nebraska Department of Insurance website can confirm licensing.
• Consider benefits impact: if the child receives Medicaid or SSI, consult counsel about how lump sums or annuity income may affect eligibility; sometimes a special needs trust is preferable.
• Discuss tax issues with a tax professional; structured settlements from physical injury claims may have favorable federal tax treatment, but each case differs.
• Consult an attorney before transferring funds: moving settlement money without court approval can create legal exposure and later require costly remedies.