by John Darer® CLU ChFC MSSC CeFT RSP CLTC
Do structured settlement payments have to go through probate when you die?
The answer is "it depends". By naming a beneficiary of your structured settlement payments, and registering (and confirming) that designation in writing with the annuity issuer or qualified assignment company, one's beneficiaries can avoid the delay of probate which could take more than a year in certain jurisdictions. If the payments are simply left to the Estate of the Payee then the structured settlement payments are distributed according to the deceased payee's will, which requires probate, or proving the Will.
The probate court determines if the Will is valid, hears any objections to the Will, orders that creditors be paid and supervises the process to assure that property remaining, including the structured settlement payments (if there has been no prior beneficiary designation), is distributed in accordance with the terms and conditions of the Will.
If there is no will, the decedent is said to have died intestate, a status which puts a time drag on the proceedings and could delay access to the payments for an uncomfortable period of time. In the case of an intestate decedent, the Court appoints a person to receive all claims against the estate, pay creditors and then distribute all remaining property in accordance with the intestate laws of the state.
It is obviously a good idea to name a beneficiary to your structured settlement payments! Be sure to periodically review your beneficiary designations to account for changes in family status. For example. if you are receiving payments and your named beneficiary predeceases you, the payments go to your Estate if no contingent beneficiaries are named by you. That means Probate comes back into play.