Disclaimer: This is educational information, not legal advice. I am not an attorney. For help with your specific case, consult a licensed Tennessee attorney who handles minor settlements, guardianship/conservatorship, or structured settlements.

Detailed answer

If you receive settlement money that is intended for a child, you generally cannot simply spend or invest those funds on the child’s behalf without following Tennessee procedures. Courts and insurers use several legal vehicles to protect a child’s settlement proceeds and to allow orderly, tax-efficient payments over time. The most common approaches are: (1) a court-approved structured settlement annuity; (2) a custodial account under the state’s minor-transfer law (UTMA/UGMA); or (3) a trust (including a testamentary or special needs trust). Which option is right depends on the dollar amount, the child’s needs, any government benefits the child receives, and court requirements.

Step-by-step process (typical)

1. Identify how the settlement is characterized and whether court approval is required.

   Many settlements for minors—especially personal-injury recoveries—require a judge’s approval before funds can be disbursed to a parent or guardian. If the case was filed on the child’s behalf, the plaintiff’s attorney usually files a petition asking the probate or juvenile court to approve the settlement and to direct how funds are to be held or paid out.

2. Decide whether a structured settlement annuity is appropriate.

   A structured settlement converts a lump-sum recovery into a series of future payments purchased from an insurance company. It can provide lifetime or fixed-period payments and can be designed to cover medical expenses, education, and routine living costs. Structured settlements are common when plaintiffs or courts want predictable, long-term payments rather than a single lump sum.

3. Propose the annuity terms to the court for approval (if court involvement is required).

   When funds belong to a minor, the court often must approve the settlement and the proposed structure (including any annuity contract) as being in the child’s best interest. The court will typically review who will be the payee or custodian and whether the payment schedule is suitable.

4. Work with counsel and an insurer or annuity broker to obtain firm quotes and draft documents.

   A licensed annuity issuer or broker will prepare the annuity contract and (if this is a structured settlement arising from a personal injury settlement) may use a qualified assignment and the insurer (or a reinsurer) to guarantee payments. Attorneys typically provide the court with the annuity contract, assignment documentation, and proposed order for the judge’s signature.

5. Ask the court to appoint a guardian/conservator or approve a custodian if required.

   For some arrangements, the court will appoint a conservator or guardian to manage the funds. For smaller awards, the court may approve a custodial arrangement under the state’s minor-transfer law so a parent can manage the property for the child until the statutory age of majority.

6. Obtain the court order and set up the annuity or custodial account as directed.

   Once the judge signs the order, the defendant/insurer or payer issues payment according to the order—either by purchasing an annuity for the child or transferring funds into the approved custodial account or trust.

7. Follow court reporting or accounting requirements.

   If a guardian, conservator, or custodian was appointed, Tennessee courts usually require periodic accounting. If the funds are in a structured annuity, you must follow the annuity contract and the court order regarding distributions.

Key legal and practical considerations under Tennessee law

• Court approval: Tennessee probate and juvenile courts regularly approve settlements for minors to ensure the arrangement protects the child’s best interest. Ask the attorney who handled the settlement or contact your local probate court for procedural requirements. Tennessee’s statutes and court rules govern probate and guardianship procedures; a starting place for locating those statutes is the Tennessee Code hosted by the Tennessee General Assembly: https://www.capitol.tn.gov/.
• Custodial accounts vs. structured annuities: For small to moderate awards, a custodial account under the state’s minor-transfer law can be a simple option. For larger awards or when long-term, predictable income is desired (for example, to pay for medical care or to replace lost earning capacity), courts and families often prefer a structured settlement annuity.
• Insurance regulation: Annuities are issued by insurance companies regulated in Tennessee. Use licensed insurers and brokers. The Tennessee Department of Commerce & Insurance provides consumer information on annuities and insurers: https://www.tn.gov/commerce/insurance.html.
• Tax and benefit effects: Structured settlements for personal injury are often tax-advantaged, but tax issues can be complex. If the child receives or may apply for government benefits (e.g., Medicaid, SSI), a simple annuity or custodial account can affect eligibility. For children with disabilities, a special needs trust or pooled trust may protect benefits better than a direct annuity. Consider both tax counsel and an attorney familiar with public-benefits planning.
• Choosing an annuity type: Fixed vs. indexed vs. immediate vs. deferred annuities each have different risk/reward profiles. Courts and parents should compare guaranteed payments, credit quality of the issuing company, fees, and whether the annuity allows cost-of-living adjustments or future modifications.

Who should handle which tasks?

• Settlement attorney: prepares the petition, drafts the proposed order, and coordinates court approval.
• Parent/guardian: provides documentation about the child’s needs and family situation.
• Insurance broker/annuity issuer: provides annuity quotes and contract language for the court to review.
• Tennessee probate court: decides whether to approve the settlement, appoint a conservator (if needed), and enter an order that legally directs how the funds must be handled.
• Tax advisor or elder/benefits attorney: advises on tax consequences and on protecting public-benefits eligibility where relevant.

Helpful Hints

• Start the court-approval process early. Courts may require forms, a petition, notice to interested parties, and a hearing date.
• Bring documentation to the court: settlement agreement, proposed annuity contract, life-care plans or expense estimates for the child, and any past medical bills or anticipated needs.
• Compare multiple annuity providers. Check the insurer’s financial strength ratings (AM Best, S&P) and confirm the company is licensed to do business in Tennessee (Tennessee Department of Commerce & Insurance).
• If the child receives SSI/Medicaid, get specific legal advice about a special needs trust or other structures that protect eligibility.
• Be careful about selling or factoring annuity payments. Many states restrict or require court approval for transferring future structured-settlement payments; avoid transfer companies that promise quick cash without court review.
• Keep records of all transactions and court orders. If you are a court-appointed conservator, follow accounting deadlines to avoid complications.
• Ask whether the proposed order names a successor payee or guardian in case the parent becomes unable to serve.
• If you cannot afford a private attorney, contact your local legal aid office or the Tennessee Bar Association’s lawyer referral service for guidance on minor-settlement procedures and court forms.

Resources

• Tennessee Code and statutes (searchable): https://www.capitol.tn.gov/
• Tennessee Department of Commerce & Insurance (consumer information on annuities and insurers): https://www.tn.gov/commerce/insurance.html
• Tennessee Judicial Branch (court locations and self-help resources): https://www.tncourts.gov/

Summary: To protect a child’s settlement funds in Tennessee, you will usually seek court approval and then place the funds either into a court-approved structured settlement annuity, a custodial account, or a trust. Work with the settlement attorney, a licensed annuity issuer, and—when necessary—probate court and a benefits or tax attorney to design an arrangement that meets the child’s short- and long-term needs.