Using a Minor’s Annuity for Family Living Expenses

When a court sets up a structured settlement to benefit a minor, it does so with the child’s long-term financial welfare in mind. For example, if a parent dies and survivors win or settle a wrongful-death lawsuit, surviving children may receive periodic payments for a certain number of years – even after they turn 18.

But what happens after the court puts an annuity in place and a child’s family finds itself in financial jeopardy? Could a parent or guardian sell the child’s future payments to pay for the family’s living expenses?

The answer is maybe, and only in rare circumstances.

Courts always want to protect a minor’s future in cases such as these, making it very difficult for anyone to sell structured settlement payments for a child. The process is considered by many financial professionals as one of the most difficult secondary annuity sales for which to gain court approval. To judges, long-term security almost always outweighs short-term gain.

When courts award these types of annuities for children, they establish the payment amount and schedule of payments for the life of the annuity. Judges typically take into account the needs of the children during pre-teen and teen years and also during young adulthood. They schedule payments to help cover necessities like food, clothing and shelter.

If all goes well, payments take care of these bills and maybe more. But many times life happens. If a parent loses a job, a mother or father providing a basic standard of living may find that task suddenly impossible. Selling a portion of settlement payments is not an easy decision for any parent, but can in some situations provide a child with a stable home.

Selling a Minor’s Payments

When parents wants to access their child’s structured settlement, a judge must approve the request in court, thanks to safeguards in the Structured Settlement Protection Act. In all cases that involve a minor, it’s the judge’s job to look at the terms of the sale to ensure that the process is in the best interest of the seller.

If the request is made, the parent or guardian must take steps to provide extra protection for the child because the court assumes the minor can’t make well-informed financial decisions about future needs. For instance, if the family is living paycheck to paycheck and can’t afford out-of-the-ordinary bills – say, a bill for an unexpected visit to urgent care or the emergency room – expect a judge to request financial documents and proof of the parent’s circumstances.

More often than not, a family with a financial situation that has them thinking about selling their child’s payments doesn’t usually have the resources to find extra money for emergencies, leading to a catch-22. In fact, hurdles for approval are often so high for the family that that most payment buying companies won’t even consider such cases.

What’s Best for the Child

Although selling a child’s future payments to pay for living expenses is difficult, it’s not impossible. Parents who take payment streams to the secondary market must prove beyond a reasonable doubt that cashing in a child’s annuity will be in the best interest of a child.

During the process, a judge may appoint a Guardian Ad Litem — someone who will evaluate the minor’s living situation, the financial well-being of the family, and the proposed settlement. After the evaluation the guardian will make recommendations to the judge.

"The more detailed the plan for the money that a parent provides the judge, the more likely the judge will approve it.”"

The judge will want to know for certain that the immediate needs fulfilled by selling of payments will outweigh the possible disadvantages of not having those payments later. For instance, a judge might not approve selling payments to purchase a second car, but might approve selling payments to avoid foreclosure of the family’s home.

The more detailed the plan for the money that a parent provides the judge, the more likely the judge will approve it.

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