Structured Settlements for Minors: Payments, Planning, and Protections

Settlements are the norm in personal injury cases. Most cases end up settling before trial, with the two sides agreeing to terms that avoid what could otherwise be a longer, more drawn-out courtroom proceeding. Most settlements are also paid as a single lump sum.

Some settlements, however, are paid as a future lump sum or in increments over time, at the request of the individual receiving the payout. These are known as structured settlements, and they can provide a distinct set of benefits.

Graham Law has touched on those benefits more broadly in a previous post. Here, we get into some of the specifics of why structured settlements for minors can make sense and how personal injury attorneys can help families make the right choices around these types of settlements.

Why and When Structured Settlements Can Make Sense for Minors

The child, for obvious age-related reasons, does not make the decision to receive a structured settlement when they obtain proceeds from a personal injury or wrongful death lawsuit. That decision falls to their parents or legal guardians, who may consider a structured settlement for the following reasons:

• Tax-free growth: Structured settlement payments tied to a qualifying personal injury claim can provide tax advantages, allowing the settlement to grow without the same tax consequences that might come with investing a lump sum.
• No impact on FAFSA: Properly structured future payments generally do not count the same way as assets already held in the child’s name when financial aid is calculated.
• No ongoing financial guardianship needed: A structured settlement can avoid the need for a separate court-supervised guardianship to manage a large lump-sum recovery for the child.
• Difficult to sell: Future payments are not easily converted into cash, which can help protect the settlement from being spent too quickly.
• Preserves the money: Payments can be scheduled for later ages or specific periods, helping make sure settlement funds remain available when the child is older.

As we’ve noted in a separate article on structured settlements for adults and children, the parent or guardian works closely with the minor’s personal injury attorney to decide how a structured settlement should look in a particular case. They can’t just choose whatever terms they want—the court must approve the settlement as serving the child’s best interests.

Once approved, the money also receives protections that serve those interests. For example, it may be decided that the money can’t be accessed by anyone until the child turns 18, or that, even after they turn 18, certain terms apply to accessing the funds, such as for education, employment, or other specified milestones.

How an Attorney Can Help With a Minor’s Structured Settlement

Structured settlements for minors can contain protections not found with lump sum settlements, but the benefit of those protections may come down to how the settlement is structured from the start.

A child injured at a young age could live with the consequences of that injury for decades, and future medical, educational, housing, or financial needs may not be fully known when the case settles.

That longer horizon can make several choices especially important, and an attorney can advise the family on:

• How much money should remain available now: A family may need funds for current treatment, rehabilitation, equipment, or other immediate needs.
• When future payments should begin: Payments can be scheduled around anticipated ages or milestones, but those assumptions need to be made carefully.
• The adequacy of future fixed payments: Inflation and changing costs can affect how far settlement dollars go over time.
• How the structure fits with the rest of the settlement plan: A structured settlement does not eliminate other options. It may be paired with an upfront lump sum, a trust, a restricted account, or another planning vehicle designed to cover both immediate and long-term expenses.
• Future questions about the structure: Future payments are intentionally difficult to access or sell, which helps preserve the money but can become a drawback if the child’s needs change substantially.

Can a Minor Child Sell a Structured Settlement?

The court-enforced timelines and restrictions associated with structured settlements make them difficult—but not impossible—to sell. In some circumstances, it may be legal to sell some or all of the future payments at a later date. The challenges of selling them, however, are part of what make structured settlements valuable for minors.

• Future payments generally cannot simply be transferred to a buyer whenever someone wants access to the money.
• A court must approve the transaction, and the child’s best interests remain relevant to the sale.
• Selling future payments can also mean accepting less than their total future value and giving up some of the protections that made the structure attractive in the first place.

Like the choice to receive a structured settlement in the first place, the choice to potentially sell one should take place with input from the family’s attorney.

There may still be circumstances where accessing money early becomes advisable or necessary, such as unexpected medical or rehabilitation expenses, education costs, housing needs, or other significant expenses affecting the child’s care or future.

If substantial future expenses can be anticipated from the outset, they may also influence how the original settlement is structured.

Talk to an Ohio Injury Attorney About a Minor’s Structured Settlement

Minor settlements involve more than how much money a child should receive. Parents and guardians may also need to decide how those proceeds should be protected, when they should become available, and whether a structured settlement is the best fit for the child’s long-term needs.

A personal injury attorney can help families evaluate those choices, work through possible payment structures, and present the settlement to the court for approval.

If you’re considering a structured settlement, Graham Law can talk you through the pros, cons, and structuring options and help you take the necessary steps to protect your family’s financial future. Contact an attorney today.