Structured Settlements and Minors
In situations where minors or juveniles receive a structured settlement due to an accident or personal injury, its often the case that the amount awarded is setup or structured so that children won't be able to touch it until they reach legal age.
In the past, there have been cases before structured settlements where the compensation provided by insurance companies for accident or personal injury lawsuits involved a lump sum. Unfortunately, there have been several instances where the parents or legal guardians of the minor spent the lump sum and the money was used frivolously and before the juvenile saw a penny it was gone.
With structured settlements for minors setup in a way that they can't touch the funds until of legal age provided some safeguards.
In many cases, there are also scheduled payments where the minor receives predetermined funds at set intervals that are designated for such things as medical care or other essentials such as food and/or clothing.
In these situations, minors can be assigned a guardianship account where the court supervises the funds, or a structured trust with a trustee or advisor to oversee it. These types of insurance annuities are protected from creditors and judgment, and provide guaranteed payments from the insurance company.
As such structured settlement annuities sit over time, they typically yield an interest of somewhere between 3 - 10 percent so the money grows over time. These funds are protected from the parents. While there can be many reasons one might sell their settlement, there are also several advantages that many are not aware of to consider.
The structured settlement annuity is the preferred method for the minor's financial security over trust funds and guardianship accounts as it provides favorable returns, tax-free status, and eliminates the chances of guardians pilfering the funds.
During the period which the child or minor is under legal age, the terms of the structured settlement are non-negotiable and setup for the duration of the annuity.
These are usually structured so they're disbursed over a certain time frame, are either setup as a monthly stream of payments or periodic lump sums, and often include an increase to accommodate the rising cost of living expenses.
While there are circumstances that allow parents or guardians to sell a structured settlement annuity on the behalf of minors or juveniles, it is not common. Furthermore, the requirements to make such a request can be challenging. It would be required by the court that the parents are able to provide proof beyond a doubt that the child's needs would be better met if the settlement were sold in their interest as opposed to waiting for future payments.
But once the minor has reached the legal age of adulthood, they're within their right to sell structured settlement payments for a lump sum if they choose to, and the matter receives more leniency when brought forward compared to when parents request it on behalf of the child.
As with the selling of any structured settlement payments, the court must consider the transfer fair and interest best interest of the annuitant, according to the provisions of the Structured Settlement Protection Act (SSPA) and receive court approval. To find out the value of your settlement, try the calculator to help determine its worth.