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What to Expect From Your Child’s Structured Settlement

Updated on August 6, 2008

To learn more about Structured Settlements, read Structured Settlement Money and Children. This article will inform you of what to expect from the courts and others when entering into a structured settlement money situation with your child.

Who's The Boss?

It can be confusing to know just who is calling the shots in a case where a child receives a settlement. Children cannot legally own bank accounts or enter into any type of contracts, including their own structured settlements.

Attorneys will prepare the paperwork to designate the amount and disbursement instructions for the structured settlement payments. A judge then reviews the plan to make sure it serves the primary purpose of protecting the child's rights. Once approved, the judge issues an order to bind the child to the settlement, which is like signing a contract, but for a minor. Then a bank account can be opened and the annuity purchased, usually by the attorney. Although judges review settlements for fairness, it's not the judge's duty to obtain the best settlement for the child. That is up to the parents and their attorneys.

Where Does the Money Go?

Whatever settled amount of money that is deemed necessary for current and future medical care is set aside in a restricted bank account until the child reaches legal age. The rest of the money is used to purchase an annuity, which is a financial instrument that allows the money to grow. Set up correctly, structured settlements use special annuities that allow funds to grow tax-free as well as to distribute payments at a later date, also tax free.

For example, a structured settlement for a 10-year-old girl who was bitten by a dog might result in an insurance company pay out of $60,000.00. The attorney gets $15,000.00, medical expenses eat up another $3,000. Let's say the parents spend an additional $2,000 to pursue the claim. The child could still receive over $150,000.00, tax free. How can that be? It's because a structured settlement uses an annuity to grow the money (as well as keep it safe from potential misuse by parents or guardians).

Other Claims on Structured Settlement Money

The attorneys are almost always paid directly from the settlement money. Any costs borne by the lawyer to prosecute the claim are also from this sum. If the child's insurance company made payments to medical professionals as a result of the injury that resulted in the settlement, they may have a right to reimbursement. Medicaid may also have a claim on settlement funds if they paid medical bills.

Legal Disclaimer

I am not a lawyer, so obviously you shouldn't take any legal advice from me. This article is meant to be informational only and may well become outdated by the time you get around to reading it. Please consult a competent legal professional.

Do Your Homework

Settlement Partners

Example of Dog Attack Resulting in Settlement

Comments

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  • Julie-Ann Amos profile image

    Julie-Ann Amos 

    10 years ago from Gloucestershire, UK

    Nice hub, I'm linking to it from my structured settlements hubs

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