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.

Structured settlements are more common than most people realize. Industry data reported by Forbes shows the industry placed a record $9.481 billion in annuity premium in 2024, up 10% from the prior year. Most recipients never check what happens to those payments after they are gone, and the wrong assumption can cost a family the entire remaining value. This guide covers every payment type, how beneficiaries and spouses inherit, the tax rules, and the steps to protect what you leave behind.

What Happens to a Structured Settlement When You Die?

Guaranteed (period certain) payments continue to your designated beneficiary for the remaining term, while life contingent payments stop permanently at death and pass nothing to heirs.

The outcome 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.

Two named versions of these hybrids come up often. A life with period certain settlement pays for the recipient's lifetime but guarantees a minimum number of years, so a beneficiary collects the balance of the guaranteed years if the recipient dies early. A joint and survivor settlement pays the primary recipient for life, then continues to a named second person, usually a spouse, for the rest of that person's life. Families who want lifelong income for a surviving spouse often choose the joint and survivor structure when the settlement is first set up.

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.

Guaranteed vs. Life Contingent Payments After Death

The differences between guaranteed and life contingent payments become most consequential after a death. The following table compares how each payment type is handled across eight key areas that heirs and estate planners need to understand.

Factor	Guaranteed (Period Certain)	Life Contingent
What happens to payments at death	Payments continue to the named beneficiary for the remaining guarantee period	Payments stop permanently; the insurance company retains all remaining value
Who receives remaining payments	Named beneficiary, or the estate if no beneficiary is designated	No one; there are no remaining payments to receive
Can heirs sell the payments	Yes, through the same court-approved SSPA process used by original recipients	No; payments cease at death and there is nothing to sell
Probate involvement	Payments bypass probate if a beneficiary is named; payments go through probate if no beneficiary exists	Not applicable; no payments remain to distribute
Estate planning implications	Remaining payments may be included in the taxable estate for federal estate tax purposes if the estate exceeds $15 million (2026 exemption per IRS estate tax guidelines)	No estate tax impact because no asset transfers at death
Commutation rider availability	Some contracts include a rider that converts remaining payments to a lump sum for the beneficiary	Not available; life contingent payments have no death benefit feature
Option to sell before death	Yes, the recipient can sell some or all guaranteed payments while alive	Yes, and this is the only way to convert life contingent payments into an inheritable asset
Impact on tax-free status (physical injury)	Tax-free character under IRC 104(a)(2) is preserved for the beneficiary	Not applicable; payments do not continue

Understanding which type of payments you hold is the first step in any estate plan involving a structured settlement. If you are unsure, request a Verification of Benefits from your insurance company. CSF can also help you review your VOB and explain your options at no cost.

How to Notify the Issuer After a Death

When a structured settlement recipient dies, the beneficiary or estate representative must notify the issuing insurance company to redirect or confirm the status of remaining payments. The process is straightforward, but delays in notification can cause payment interruptions that take weeks to resolve.

Follow these steps to notify the issuer:

1. Obtain certified copies of the death certificate. Most issuers require at least one certified copy. Order extra copies from the county vital records office, as other institutions (banks, Social Security, life insurance) will also need them. Processing times vary by county, but most issue certified copies within one to two weeks.
2. Contact the issuing insurance company's structured settlement servicing unit. Call the dedicated structured settlement phone number, not the general customer service line. Key issuer contacts include MetLife at (800) 638-2704, Prudential at (800) 778-2255, Allstate/Everlake at (833) 879-0775, John Hancock at (800) 624-5155, Corebridge (formerly AIG) at (800) 288-4088, Talcott Resolution at (800) 678-2282, New York Life at (855) 469-5772, and Symetra at (800) 796-3872. Our issuer transfer guides have additional contact details for each company.
3. Provide beneficiary documentation. The issuer will ask for the certified death certificate, the beneficiary's government-issued photo ID, proof of the beneficiary's identity (such as a Social Security number), and possibly the original beneficiary designation form. If the settlement goes to the estate rather than a named beneficiary, the issuer will require Letters Testamentary or Letters of Administration from the probate court.
4. Confirm the payment redirection timeline. Most issuers process beneficiary claims within 30 to 60 days after receiving all required documentation. Payments already in transit at the time of death may need to be returned and reissued. Some issuers, such as MetLife and Prudential, have dedicated claims departments that can expedite this process. Ask for a written confirmation of the new payment schedule and recipient.

We see families lose weeks of payments simply because they did not know who to call or what paperwork the issuer needed. Getting ahead of this process, ideally by keeping beneficiary designations current and a copy of the annuity contract accessible, saves your family real time and stress during an already difficult period.

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.
• Naming a beneficiary who is not a US citizen or who lives abroad takes extra steps. Insurance companies verify beneficiaries against federal records, and confirming someone outside the country can be slow. If you plan to name a foreign beneficiary, set up the process with your issuer in advance.

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.

How Spousal Continuation Protects a Surviving Spouse

Spousal continuation lets a surviving spouse become the legal owner of the structured settlement, keep the payments on the same schedule, and preserve their tax-free status.

This is a privilege no other beneficiary has. Most beneficiaries simply receive whatever guaranteed payments remain. A surviving spouse who elects spousal continuation steps into the recipient's position entirely, taking ownership of the annuity itself rather than just collecting the leftover payments. For a physical injury settlement, the income stays free of income tax in the spouse's hands under the same rule that made it tax-free for the original recipient.

Spousal continuation is not automatic. The option has to be available under your specific annuity contract, and your spouse has to elect it after your death. If you are married and want your spouse to keep the full benefit of your settlement, ask your issuing insurance company whether your contract allows spousal continuation and what your spouse would need to do. Confirm it now, while you can still adjust your planning, rather than leaving your spouse to sort it out at the worst possible time.

Do Your Heirs Owe Estate Tax on a Structured Settlement?

Inherited payments from a physical injury settlement stay income-tax-free, but the present value of the remaining guaranteed payments counts toward your taxable estate under Internal Revenue Code section 2039.

Income tax and estate tax are two separate questions, and people mix them up constantly. Under IRC section 104(a)(2), payments from a physical injury or wrongful death settlement are free of income tax, and that tax-free character carries to your beneficiary. Estate tax works differently. Under IRC section 2039, the actuarial present value of guaranteed payments that are due but not yet paid is included in your gross estate.

For almost everyone, this never becomes a bill. Federal estate tax applies only to estates above the exemption, which is $15 million per individual in 2026 per IRS estate tax guidelines. Several states set lower thresholds, so a large settlement can matter at the state level even when it does not at the federal level.

One mistake is common and expensive, so it is worth calling out. Do not name "my estate" as the beneficiary of your annuity. Naming your estate instead of a person or a trust pulls the full remaining value through probate and can expose it to estate tax that careful planning would have avoided. Name people or a trust directly, and the guaranteed payments pass outside probate the way a life insurance benefit does. If your settlement came from a non-physical-injury case, such as an employment or contract dispute, those payments are taxable as ordinary income to your heir, so plan for that as well.

What Is a Commutation Rider?

A commutation rider is a contract provision that converts remaining guaranteed structured settlement payments into a single lump sum paid to your beneficiary upon your 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 can sell inherited guaranteed payments for a lump sum through a court-approved transfer under the state's SSPA.

The process works the same way it does for original settlement recipients. The heir files a transfer petition, a judge reviews the terms, and the court issues an order approving the sale. The entire process typically takes 30 to 60 days from filing to funding. For a full overview of how structured settlement transfers work, including state-specific timelines, visit our structured settlements page.

Here is what heirs should know about selling inherited payments:

• The heir steps into the recipient's shoes for guaranteed payments. The payment schedule, amounts, and guarantee period remain the same.
• The sale 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 or sold by heirs. Since they stop at death, there is nothing to transfer.
• Tax treatment depends on the nature of the original settlement. Payments from physical injury or sickness settlements remain tax-free to the beneficiary under IRC 104(a)(2). Payments from non-physical injury settlements are taxable as ordinary income.

CSF has handled hundreds of inherited settlement transfers. If you have inherited structured settlement payments and need cash, call us at (800) 317-3769 for a free quote. You can also read our step-by-step guide to selling a structured settlement or estimate what your inherited payments might be worth using 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.

Can my spouse take over my structured settlement when I die?

Often, yes, through an option called spousal continuation. If your annuity contract allows it, a surviving spouse can become the owner of the structured settlement, keep the payments on the same schedule, and preserve their tax-free status. It is not automatic, so ask your issuing insurance company whether your contract offers it.

Do my heirs owe estate tax on my structured settlement?

Usually not. Inherited payments from a physical injury settlement stay income-tax-free, but the present value of remaining guaranteed payments counts toward your gross estate under IRC 2039. Federal estate tax applies only to estates above $15 million in 2026, though some states set lower thresholds.