Injured individuals often want to know what will happen to their structured settlement after they pass away. Structured settlements are usually set up so payments are made for the life of the injured party—with a guaranteed minimum number of years. If the claimant dies before the guaranteed minimum number of years is reached, the remaining guaranteed settlement portion can go to a structured settlement beneficiary. Multiple designated beneficiaries can be named including contingent beneficiaries if a beneficiary dies within the guaranteed period.
If the beneficiary is a minor, beneficiary designation must be included in the court order with the name of the minor’s parents or designated guardian named as “interested parties.” Naming beneficiaries to the proceeds in case of the claimant’s death must be spelled out at the time the structured settlement is created.
Changing a Structured Settlement Beneficiary
The claimant can request a change in beneficiaries by contacting the annuity company or the broker who placed the annuity. The request must be made in writing.
Payments to Structured Settlement Beneficiaries
When setting up the structured settlement, claimant’s beneficiaries would receive the remaining settlement in the payment stream that was created at the time of settlement. As an alternative, a commutation rider can be added to the settlement agreement providing for a lump sum payment of the remaining guaranteed payments. If the claimant has a family trust, they can name it to act as the beneficiary as well.
When a structured settlement is created for a claimant as a result of a personal injury or workers comp matter, structured settlement payments passed to beneficiaries are tax-free. If the settlement was the result of a non-personal injury, the income received by the structured settlement beneficiary is taxable in the year it is received.
Feel free to contact or give me a call to discuss beneficiary issues you may have.