Minor Settlements Law Law and Legal Definition

Whenever a minor receives a settlement from a lawsuit, such as a lawsuit for personal injury, the state laws, which vary by state, usually require an application to be filed in the appropriate court for approval of the settlement and disbursement of funds. The purpose of this judicial review is to ensure that the proposed settlement is fair to the minor. Often, if the gross settlement is over a certain amount, then a guardian of the estate must be appointed to file the application. If the amount is less than the defined amount, a parent or custodian may file the Application for Approval of the Settlement.

Laws of many states require that any money a minor receives in settlement of a claim must be held in trust on behalf of the minor. Frequently this is accomplished by placing the funds into a specially restricted bank account whereby no money can be removed from the bank account without prior court authorization. Thus, if the guardian wishes to spend any of that money on behalf of the minor, the guardian must make an application to the court asking for the court’s approval of the expenditure. The reason for the guardianship is to protect the minor’s money from bad investments, expenditures unrelated to the minor’s health and well being, and to generally protect the minor’s money until the minor reaches the age of 18 or beyond. Each year, the guardian must file a report with the court detailing the value of the assets held on behalf of the minor, and listing all expenditures made with the minor’s money for that calendar year.

Guardians often select a “structured settlement” when settling a minor’s claim. The purpose of this structured settlement is to invest the settlement proceeds from the minor’s claim. These investments grow over time and once the minor reaches 18 years of age or beyond, the investment begins to pay dividends to the former minor. Settlements of this nature can be structured in many different ways, for example paying out a certain amount every year for the rest of the former minor’s life. It can pay certain lump sum amounts every 5 years for a number of years. Structured settlements can be used to finance college educations by providing a certain sum of income each year that the child would attend college.

It is a good idea to check with the court for any particular practices followed by that court in approving minors’ settlements. For example, in one county all minor settlements may be presented in the Ex Parte Department of the appropriate case assignment area. In some other counties, minor settlements are presented to the Presiding Judge or the judge assigned to hear the trial of the case.