Structured Settlements for Minors

Structured settlements can provide long-standing income for minors. They gain access to funds at 18 years old to prevent frivolous spending and to protect financial security.

Structured settlements are financial investments awarded as restitution in personal injury or wrongful death lawsuits. They can be presented as a one-time lump sum, but structured settlements are usually disbursed through periodic payments due to their large amounts.

These large settlements can secure a higher quality of life for their owners. This is specifically true for minors who look forward to a future of higher education, a down payment on a car or purchasing their first home.

However, until they reach the age of 18 to legally manage their settlement money, there are rules in place to protect minors’ financial security.

Court Protection for Minors

There have been cases where settlements were provided as a lump sum. But access to a large sum of money can be tempting for parents or guardians meant to protect it. For that reason, personal injury settlements are typically set up as a structured settlement to prevent premature access and frivolous spending.

The legal system is protective of a minor’s financial security and requires court approval prior to awarding a settlement. Courts are responsible for dictating:

  • How the settlement is awarded
  • How the money is spent prior to minors reaching the age of majority
  • Whether or not the settlement value is fair

It’s the judge’s job to properly safeguard the funds and prevent guardians and minors from inappropriately spending their settlement award. If provided in a large lump sum, settlements are placed in a protected account until minors reach 18 years old and can assume full control over the account.

This ensures:

  • Minors are awarded the value they are due
  • Money is invested properly to grow over time
  • Money is protected from improper use or individuals seeking personal gain
  • Minors cannot spend the settlement money all at once
  • The settlement has long-term use

Benefits of Structured Settlements for Minors

Structured settlements provide a long-term stream of tax-free income for a period of time, or for life. As the years go by, this allows for compounding interest to increase the account value.

When awarded to minors, these payments are heavily protected until they reach the age of majority, typically 18 years old. Until that time, settlement funds can only be accessed to finance specific needs. This includes medical expenses if the structured settlement was tied to a personal injury lawsuit.

Structured settlements can help to ensure financial freedom, along with securing other financial needs like:

  • Steady income
  • College tuition
  • Down payment on a home
  • Car payment
  • Retirement investments

Can Minors Sell Structured Settlement Payments?

There are some cases in which selling structured settlements are in the best interest of the minor, but courts require substantial proof. If minors are younger than 18, parents will need to show that selling their child’s future payments now benefits them more than waiting for them to reach the age of majority. However, there are very few successful cases.

Once they reach the legal age, minors can assume full control of their settlement contract and can sell payments as they see fit. You can choose to sell all or a portion of your payments, but it is important to understand that you will not receive the full initial value.

In exchange for quick access to cash, you can sell your future payments at a discounted rate. The discount rate depends on a number of factors including:

  • The value of payments being sold
  • How many payments are being sold
  • Interest rates
  • How soon payments will arrive
  • Additional fees

Be sure to discuss your options with a lawyer and financial advisor before selling your payments.

Let CBC Help

Our team of experienced, caring professionals will make the process of selling some or all of your structured settlement or annuity payments easy.