Detailed Answer — Managing settlement funds for a minor in Ohio
If you have settlement money that will benefit a child, Ohio law generally requires that the child’s money be protected and managed in the child’s best interest. Common ways to protect those funds include a court-approved structured settlement (an annuity that pays over time), purchasing an annuity or placing funds under a court-supervised guardianship or other protected account. Which route is best depends on the age of the child, the size of the recovery, the child’s needs (including special needs and public-benefits eligibility), and whether the settlement is for personal injury, wrongful death, or another matter.
Who must approve and why
Because minors cannot legally control significant financial settlements, a probate court or other court with authority over minor-compromise matters usually must approve the settlement or the way funds are held. In Ohio, guardianship law and probate-court supervision provide the framework for protecting a minor’s property; see Ohio Revised Code Chapter 2111 for the statutory authority on guardianships and the court’s role: Ohio Rev. Code Ch. 2111. The probate court will typically want evidence that the arrangement serves the child’s best interests before approving annuities or transfers.
Common legal paths to place settlement funds into an annuity or payout plan
- Structured settlement (periodic payments): The parties (claimant and insurer) agree to resolve future obligations by arranging periodic payments through a life-contingent or fixed annuity purchased from a licensed insurer. Structured settlements commonly handle future medical needs and long-term income needs.
- Purchase of an annuity on behalf of the minor: With court approval (often via the probate court), a guardian or the party who has custody of the funds can buy an immediate or deferred annuity from an authorized insurance company to provide scheduled payments to the minor.
- Guardianship of the estate: If the child already has or needs a guardian of the estate, the guardian can ask the probate court to approve the purchase of an annuity as a protective investment. Guardians act under the court’s supervision consistent with Ohio guardianship statutes: Ohio Rev. Code Ch. 2111.
- Other protective vehicles: Depending on facts, the court may approve a trust (including a special needs trust for disabled children) or a blocked/custodial account that restricts access to the funds rather than an annuity.
Step-by-step practical process
- Confirm who holds the money. If the insurer or defendant holds settlement funds in escrow, start discussions there. If counsel or a parent holds the check, do not disburse funds until the court approves the plan.
- Decide the payout structure. Determine whether an immediate cash sum, periodic payments (structured settlement/annuity), or a trust better meets the child’s future needs.
- Ask counsel to prepare a petition or motion for court approval. In many Ohio cases a petition to the probate court or motion in the civil case will be required. The petition should describe the settlement, explain why the annuity or other device serves the child’s best interest, propose the insurance company and annuity terms (or trust terms), and list any recommended guardian or fiduciary.
- Provide the court with supporting documents. Typical attachments include the settlement agreement, annuity illustrations, insurer licensing information, a proposed order, and any required guardian ad litem or attorney-for-minor reports.
- Obtain court approval and entry of a formal order. The court’s order will authorize the purchase of the annuity or transfer into the approved vehicle and identify who may receive payments and under what conditions.
- Purchase the annuity and file proof with the court. After purchase, file the insurer confirmation, contract, and proof of funding so the court record shows compliance with the order.
Choosing an annuity and insurer
Work with a licensed insurance company or a licensed structured-settlement broker. Confirm the insurer is authorized to sell annuities in Ohio (Ohio Department of Insurance administers insurer licensing). For general information, see the Ohio Department of Insurance: insurance.ohio.gov. Choose annuity terms that match the child’s likely needs (payment frequency, survivor options, inflation adjustments, and duration).
Tax, benefits, and public-assistance considerations
Annuity payments often have different tax and public-benefits consequences than lump sums. If the child receives or may apply for means-tested benefits (Medicaid or Supplemental Security Income), the structure, ownership, and timing of payments can affect eligibility. For disabled children, a properly drafted special needs trust or pooled trust can preserve eligibility while allowing funds to supplement benefits. Consult a tax advisor and an attorney experienced in public benefits and special needs planning.
Timing, costs, and court fees
Court approval and the guardianship process can take weeks to months. Expect court filing fees, guardian or guardian-ad-litem fees, attorney fees, and possible annuity broker or placement fees. The court will review whether those costs are reasonable against the amount recovered for the child.
Where in Ohio to file and who to contact
Minor-probate matters are handled in the county probate court where the minor lives or where the action is filed. Local court procedures vary. Contact the clerk of the county probate court to confirm filing requirements and required forms. For statutory authority over guardianships and the probate court’s role, see: Ohio Rev. Code Ch. 2111 (Guardians) and for general court organization: Ohio Rev. Code Ch. 2101 (Courts).
When to hire an attorney
Consider hiring a probate or elder/special-needs attorney if the recovery is large, if the child has special-benefit needs, or if the proposed arrangement is complex. An attorney can draft the court petition, coordinate with insurers and annuity brokers, and advise about tax and benefits impacts. If funds are modest, ask the court clerk whether a simpler custodial option is available.
Disclaimer
This information is educational only and is not legal advice. It does not create an attorney-client relationship. For advice about your specific situation, contact a licensed Ohio attorney who handles probate, guardianship, or structured-settlement matters.
Helpful Hints
- Do not cash or distribute settlement checks for a minor until the court approves the plan.
- Ask the insurer for a written annuity illustration and proof the insurer is licensed in Ohio.
- Get a written estimate of all fees (court, guardian ad litem, attorney, broker) before asking the court to approve a payment plan.
- Consider alternatives such as a trust or guardianship if the child qualifies for public benefits or has special medical needs.
- Choose an annuity with stable credit backing from a financially secure, state-licensed insurer; verify ratings and licensing through the Ohio Department of Insurance: insurance.ohio.gov.
- Keep detailed records and file required paperwork with the probate court to avoid future disputes about the funds.
- If in doubt, get a short consultation with an Ohio probate attorney before finalizing any long-term payment arrangement.