Settlement Options for Minors: Case Examples

When handling a minor’s case, contact Traci Kaas early in the process to explore the settlement options. Courts favor a conservative approach that protects the funds until the minor reaches the age of majority. Because a minor cannot own an investment, traditional financial vehicles such as 529 plans and mutual fund accounts are off the table.  Our settlement planners are armed with a deep understanding of how to ensure that the minor’s present and future financial needs are met within the context of the court’s guidelines.

Creating a Plan

The requirements surrounding minors’ settlements vary by state, and often, by county. A conservator or guardian ad litem may be assigned to protect the minor’s best interests. These court-appointed representatives may recommend engaging a plaintiff settlement planner to analyze the needs of the minor, present all available financial options, and assist in customizing a settlement plan to submit for court approval.

When determining the best approach for a minor’s settlement, a number of considerations must be taken into account including:

• Current financial and/or medical needs
• Existing needs-based government benefits
• Future medical needs and financial goals
• Future loss of earnings
• Expected ability to handle funds in the future

Once the settlement planner has a clear picture of the minor’s specific needs, a comprehensive plan can be created to protect the minor’s assets until the age of majority, or a later date, if necessary. The importance of the minor’s future ability to handle the funds cannot be overstated; the rate of return won’t matter if the money is dissipated as soon as the minor reaches the age of majority.

If the minor has suffered a more severe injury with inevitable future health considerations, the plan will include payments that provide for their long-term medical and financial needs. The following are case examples of how a settlement planner may approach two very different minors’ settlements.

Case Examples: Minors’ Settlements

Case #1: Traumatic Brain Injury and Spinal Cord Injury

Colin is an 11-year old plaintiff who suffered a traumatic brain injury and a spinal cord injury after falling off faulty playground equipment. As a result of his injuries, Colin suffered severe cognitive impairment, seizures, sleep disturbance, speech impairment, and permanent paralysis of his legs. His doctors determined that he is permanently disabled and that he will require lifelong medical care.

After attorney fees, Colin’s net settlement was $1,225,000. At the time of settlement, Colin lived with his mother and his two younger siblings in subsidized housing. Because of their low income level, the family received needs-based government benefits including Medi-Cal, SSI, and SNAP (food assistance).

With the overwhelming costs of Colin’s long-term medical needs on the horizon, his mother wants to ensure that the family will continue receiving their need-based government benefits, most importantly Medi-Cal. Colin will require round-the-clock nursing support, regular physical therapy visits, home modifications and medical equipment including a hospital bed, a power lift, a bathroom lift, an electric wheelchair, a handicap accessible van, and seizure medication.

After discussing several options with their settlement planner, the following plan was devised for Colin: $500,000 in cash would be used as seed money to fund a special needs trust (SNT) at the time of settlement. The remaining funds would be placed in a structured settlement annuity, which would then be used to fund the SNT in the future. By placing the money in the SNT, Colin’s family could continue to receive their needs-based benefits, while utilizing the money in the SNT to pay for goods and services to enhance Colin’s quality of life. The incorporation of the structured settlement as a long-term funding source would allow Colin’s settlement proceeds to grow tax-free, while also providing him with an added layer of protection.

*Expected payments are estimated payments that will be made over the claimant’s life expectancy as computed by the life company, or that will be made over the guarantee period if no life contingent benefits are quoted. Lifetime payments will continue until the death of the claimant, only if life contingent benefits are quoted.

Case #2: Dog Bite Injury with No Future Medical Needs

Taylor is a 9-year-old plaintiff who was bitten by her neighbor’s dog. After attorney fees, Taylor’s net settlement was $100,000. She was not expected to have any future medical needs resulting from this injury, so her parents wanted to utilize her settlement proceeds to cover the cost of college. Beginning at age 18, Taylor will receive semi-annual payments of $10,000 for four years, totaling $80,000.

Rather than receiving the remaining funds in one large lump sum, Taylor’s parents opted for a $25,000 lump sum payment at age 23 and a $33,600 lump sum payment at age 25. Instead of parking the $100,000 in a low-interest bearing savings account (the growth on which would be taxable), Taylor’s parents chose to let the money grow tax-free in a structured settlement, with the reassurance that the funds will be available beginning when Taylor turns 18.

*Expected payments are estimated payments that will be made over the claimant’s life expectancy as computed by the life company, or that will be made over the guarantee period if no life contingent benefits are quoted. Lifetime payments will continue until the death of the claimant, only if life contingent benefits are quoted.

Contact Traci Kaas to learn more

Before you settle your next minors’ case, contact the experts at Traci Kaas. Our team will work with you and your client to develop the best possible solution for financial security. Contact us today at 800-354-2258 or info@tracikaas.com.