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Structured Settlements and Kids

Unfortunately, bad things don’t just always happen to adults.  When a child suffers a terrible injury and a lawsuit follows, the end result might be a structured settlement.

When the plaintiff in a personal injury lawsuit is a child, the court usually will put part of the settlement into a blocked bank account designed to pay current and future expenses.  This bank account will remain restricted until the child reaches the age of majority (usually 18).  Lawyers’ fees and other expenses will also be paid from the settlement.  If Medicaid was used to pay some of the child’s medical expenses, they may also have a claim to part of the settlement (check with your lawyer about this).  The remainder is placed into a structured settlement.  Since a minor child cannot legally enter into a contract, the process of making the settlement binding is called confirmation, court approval, guardianship, or minor’s compromise proceeding. 

Just like for adults, a structured settlement is typically a lump sum that is placed in an annuity that will invest the money then make a stream of payments to the annuitant (in this case, the child) over time.  The idea of the structured settlement is to ensure that the child has a stream of income to meet his needs for months or years.  This might be a lifetime if the child is permanently and totally disabled.  Parents and attorneys for the child should review any proposed structured settlement carefully to determine if the amount of the settlement will be sufficient for the child. 

But what if circumstances change and you need cash sooner than the annuity will provide it?  It is possible to sell a child’s structured settlement, but it’s more difficult than selling one that an adult controls.

Structured settlements for minor children will often have a no-sale provision designed to prohibit its sale in a factoring transaction.  Even with a no-sale provision, however, a court can approve a structured settlement sale if it can be demonstrated that there is a great an immediate need for the cash, and that the child’s needs are better met by selling the settlement than waiting for the next payment.  You can expect, however, that the court will scrutinize a claim like this very carefully. 

Once your child reaches adulthood and gains control of his settlement and that restricted bank account, the temptation to spend it all now will be immense, and it’s tough to expect an 18-year-old to have the maturity to know that he’ll need the money later.  At this point, the best gift you can give your child is solid financial advice, maybe even the services of a financial planner, to help protect him when you aren’t around.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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