The Settlement Alliance

Are Structured Settlements a Good Option for Minor’s Cases?

Are Structured Settlements a Good Option for Minor’s Cases?

Sep 7, 2017

When it comes to minors’ cases, courts have strict requirements about how to handle settlement proceeds. Registries of the court, surrogate bank accounts, and blocked savings accounts are among the most popular options for protecting a minor’s settlement. Some may not consider structured settlements a viable option, assuming instead that structures are only for adults or those with six- and seven-figure settlements. The fact is, structured settlements aren’t just a good option for a $400,000 settlement; they can just as easily provide a safe option for a minor receiving a $40,000 settlement. Using structured settlements in minors’ cases may be far more common than you think.

Quick Review—What is a Structured Settlement Annuity?

A structured settlement annuity is a financial arrangement that allows the claimant (in this case, the minor) to receive a series of tax-free payments on a pre-determined schedule. Instead of paying the settlement proceeds directly to the claimant, the defendant transfers the obligation to make payments to a third-party assignment company. The assignment company then purchases a structured settlement annuity, which provides payments to the claimant. Both the money used to purchase the structure and any growth on the structure are 100% income tax-free.

Why is a Structured Settlement a Great Option for Settling Minor’s Cases?

In addition to the tax-free nature of structured settlements, the interest rate is guaranteed, and there are no ongoing fees or expenses. The fixed interest rate protects the settlement proceeds from any fluctuations in the market; even if there is a market downturn, the annuity payments remain stable. The payments are also guaranteed1, providing peace of mind that the minor will have a reliable source of income for the life of the annuity.

In terms of design, a structured settlement is quite flexible. Payments are typically arranged to begin when the minor reaches the age of majority and can be scheduled monthly, bi-annually, annually, or in a series of larger lump sum payments. For example, monthly payments could be scheduled to provide a regular source of income, with a few large lump sums scheduled to pay for college expenses. It all depends on the minor’s needs and the amount of the settlement.

What do the Courts Think About Structured Settlements?

Because they are widely considered to be a safe financial vehicle, structured settlements may gain court approval more quickly than other options. Also, courts may not require reporting if a structured settlement is used because the income stream is consistent; a trust or a court account would require regular income and expense reports to ensure that distributions were made in the minor’s best interest.

Contact The Settlement Alliance on Your Next Minor’s Case

We work with law firms across the nation to provide comprehensive settlement planning for minor’s cases. Contact us today at 800-464-2500 or to learn more.

1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential