What Happens to a Structured Settlement When You Die?

If you have a structured settlement and want to make sure your family is protected, the first thing to understand is what type of payments you have. Guaranteed (period certain) payments continue to your designated beneficiary for the remaining guarantee period. Life contingent payments stop permanently when you die, and your heirs receive nothing from those remaining payments. That distinction makes all the difference for your family's financial future.

What Happens to a Structured Settlement When You Die?

A structured settlement's fate after the recipient's death depends entirely on the payment type specified in the original annuity contract. There are two categories:

1. Guaranteed (period certain) payments continue to the beneficiary for the remaining guarantee period. If you have a 20-year guaranteed settlement and die in year 12, your beneficiary receives the remaining 8 years of payments.
2. Life contingent payments end at death. The issuing insurance company stops paying, and no remaining value passes to heirs.

Most structured settlements include a combination of both payment types. The original annuity contract, issued by the insurance company (MetLife, Allstate/Everlake, John Hancock, Corebridge, or another carrier), is the source of truth for what your settlement includes. This is governed by the original settlement agreement and the annuity contract terms, not by state law.

If you are unsure what your settlement includes, request a Verification of Benefits (VOB) from your issuing insurance company. The VOB lays out every payment, its amount, timing, and whether it is guaranteed or life contingent. Not sure where to start? Call us at (800) 317-3769 and we can help you obtain and interpret your VOB at no cost. Our issuer transfer guides also have contact information for each major annuity company.

Guaranteed Period Certain vs. Life Contingent Payments

These two payment types work very differently after death. Here is what each means in practice:

Period certain payments are guaranteed for a fixed number of years, regardless of whether the recipient is alive or deceased. A 20-year period certain structured settlement pays for exactly 20 years. If the recipient dies in year 12, the beneficiary receives the remaining 8 years of payments on the same schedule and in the same amounts.

Life contingent payments are tied to the recipient's lifespan. The insurance company pays as long as the recipient is alive. When the recipient dies, payments stop permanently. The insurance company retains the remaining value of the annuity. There is no death benefit, no payout to heirs, and no remaining balance to claim.

Combination structures are common. Many settlements include both guaranteed and life contingent components. For example, a settlement might include $2,000 per month for life with a 20-year guaranteed period. If the recipient dies after 15 years, the beneficiary receives 5 more years of the $2,000 monthly guaranteed portion. Any life-only payments above the guarantee stop at death.

The "measuring life" concept determines when life contingent payments end. It refers to the person whose lifespan controls the payment stream, almost always the original settlement recipient. Insurance companies use Social Security Administration actuarial life tables as one factor in pricing life contingent payment streams. For a detailed explanation of how life contingent payments are valued and structured, see our guide on life contingent structured settlements.

How Beneficiary Designations Work for Structured Settlements

Structured settlement beneficiary designations work similarly to life insurance policies. The beneficiary is designated in the annuity contract, not in a will. This is a critical distinction:

• The annuity contract beneficiary designation typically overrides a will. Even if your will names a different person, the annuity company will pay the person listed in the annuity contract.
• Recipients can usually change beneficiaries by contacting the issuing insurance company and submitting a change-of-beneficiary form.
• If no beneficiary is named, remaining guaranteed payments go to the recipient's estate. Those payments may then go through probate, which can delay access for heirs by months or years.
• If the named beneficiary predeceases the recipient and no contingent beneficiary is listed, remaining payments again fall to the estate.

Review your beneficiary designation annually, especially after major life events like marriage, divorce, or the birth of a child. A five-minute phone call to your annuity company can prevent your family from dealing with probate or unintended distributions. If your payments do end up in an estate, CSF provides probate advances to help heirs access funds while the estate is being settled.

What Is a Commutation Rider?

A commutation rider is a provision in some annuity contracts that allows the remaining value of the settlement to be paid as a lump sum to the beneficiary upon the recipient's death. Instead of receiving ongoing periodic payments, the beneficiary receives a single payment representing the present value of the remaining guaranteed payments.

Key facts about commutation riders:

• Not all contracts include them. Commutation riders are an optional feature. Whether your contract has one depends on how the original settlement was structured.
• The lump sum is calculated at a contractual discount rate. The insurance company converts remaining payments to present value using a rate specified in the contract. This means the lump sum will be less than the total face value of the remaining payments.
• Common with certain issuers. Some insurance companies, including MetLife, more frequently include commutation riders. See our MetLife transfer guide for issuer-specific details.
• How to check: Contact the issuing insurance company and request a Verification of Benefits (VOB). The VOB will indicate whether your contract includes a commutation rider and, if so, the contractual terms.

Can Heirs Sell Inherited Structured Settlement Payments?

Yes. Heirs who inherit guaranteed structured settlement payments can sell some or all of those payments for a lump sum, just as the original recipient could have.

Here is how it works:

• The heir steps into the recipient's shoes for guaranteed payments. The payment schedule, amounts, and guarantee period remain the same.
• The sale still requires court approval under the state's Structured Settlement Protection Act (SSPA). The heir (not the deceased) is the petitioner in court.
• Discount rates may differ slightly because the buyer is purchasing an already-assigned payment stream from a secondary holder.
• Life contingent payments cannot be inherited. Since they stop at death, there is nothing for heirs to sell.

If you have inherited structured settlement payments and need cash now, CSF has experience handling inherited settlement transfers. For a complete overview of how the selling process works, see our guide to selling a structured settlement. To estimate what your inherited payments might be worth, try our structured settlement calculator.

Why Some Recipients Choose to Sell Before Death

Life contingent payments disappear when the recipient dies. We see this motivate many settlement holders, particularly those with health concerns or those who want to provide for their families, to convert some or all of their life contingent payments into cash while they are alive.

Selling life contingent payments lets the recipient:

• Use the money now for medical care, housing, debt payoff, or any other purpose
• Leave cash to family members rather than letting payments disappear at death
• Sell only a portion while keeping the rest of their income stream intact

Partial sales are common. You do not have to sell everything. CSF routinely structures partial transactions using three approaches: selling a block of future payments (for example, the next 5 years), accepting a reduced monthly amount in exchange for an upfront lump sum, or splitting the payment stream between a sold portion and a retained portion. For more on partial sales, see our guide on selling part of your structured settlement.

The tax treatment of a sale from a physical injury or sickness settlement remains favorable. Under IRC section 104(a)(2), the original tax-free character of physical injury settlement payments is preserved even after a transfer.

Frequently Asked Questions

Do structured settlement payments stop when you die?

It depends on the payment type. Guaranteed (period certain) payments continue to your beneficiary for the remaining guarantee period. Life contingent payments stop when you die, and no remaining value passes to heirs. Check your annuity contract or request a Verification of Benefits from your insurance company to confirm your payment type.

Can I name a beneficiary for my structured settlement?

Yes. Most structured settlement annuity contracts allow you to designate a beneficiary who will receive your remaining guaranteed payments if you die before the guarantee period ends. Contact your issuing insurance company to review or update your beneficiary designation.

Does a structured settlement go through probate?

If you have a named beneficiary, guaranteed payments pass directly to that beneficiary outside of probate, similar to life insurance. If no beneficiary is designated, the remaining payments become part of your estate and may go through probate.

Can you inherit a structured settlement?

You can inherit the guaranteed (period certain) portion of a structured settlement. Life contingent payments cannot be inherited because they stop when the original recipient dies. Inherited payments continue on the original schedule unless the heir chooses to sell them for a lump sum.

What is a commutation rider on a structured settlement?

A commutation rider is a contract provision that converts remaining future payments into a lump sum for your beneficiary when you die. Not all annuity contracts include this feature. Contact your insurance company to check whether your contract has a commutation rider.

Can I sell my structured settlement before I die to leave money to my family?

Yes. Many recipients with life contingent payments choose to sell some or all of their payments for a lump sum while they are alive, especially if they want to leave cash to family members. Since life contingent payments stop at death, selling converts those payments into an asset your family can use.

How do I find out if my payments are life contingent or guaranteed?

Request a Verification of Benefits (VOB) from your issuing insurance company. The VOB details your payment schedule, amounts, and whether payments are life contingent, guaranteed, or a combination. CSF can help you obtain and interpret your VOB at no cost.