Structured Settlement For Minors
When minors receive damages in a lawsuit, there are a number of concerns that should be addressed to ensure they’re receiving a fair settlement.
Among those concerns is how to protect the funds from being misused or spent for other purposes. In addition, it’s important to consider how a lump sum will be used by a young person who is impulsive and tends to waste money.
Protects Minors’ Best Interests
When a minor is awarded a settlement for an injury or wrongful death, the settlement needs to be structured in such a way that it will benefit the child. The money is intended to cover their medical expenses, provide them with long-term stability, pay for college and ensure they have enough to afford a good quality of life in the future.
When it comes to the amount of money awarded, judges often prefer that the settlement be structured so that it is deferred until the child is more mature and capable of making sound financial decisions on their own. This is because some plaintiffs do not have the skills or knowledge to manage a large lump sum and may end up spending it on things like questionable investments or luxury items.
This can have a dramatic effect on their finances and overall wellbeing. They could become strapped for cash, unable to meet their monthly payments and struggle to get by in life.
As a result, they can lose access to critical public assistance, such as Supplemental Security Income (SSI) or Medicaid. In order to protect a disabled minor’s settlement funds and their ongoing public assistance, it is often best to establish a Special Needs Trust or a Settlement Trust for them.
A Settlement Trust will indemnify a minor beneficiary from losing their preexisting SSI and Medicaid benefits, while also paying for their medical needs and educational costs as they arise. The funds can also be used to purchase a home or fund a college education.
In addition to protecting a minor’s future, the investment growth on structured settlement proceeds is guaranteed tax-free and the payments are made at a time that is convenient for the client. In addition, the company that issues the annuity is backed up by a state guarantee association or similar entity.
In addition, a structured settlement can speed up court approval by proving to the judge that the minor’s interest is protected and that they will be properly compensated. As a result, you and your client can avoid having to go through the lengthy process of filing a lawsuit and waiting for a jury verdict, which can take months.
Court-Approved
The settlement of a major legal case can be a life-changing event for a minor. In cases of birth injuries, medical malpractice, or wrongful death, the award can provide financial stability to help the child with long-term needs.
A structured settlement is a great option to protect the settlement money, and the best part is that it’s court-approved! The structure is designed by the courts and lawyers to make sure that the money is used responsibly.
Typically, the settlement will be divided into periodic payments. These are usually put in a blocked bank account or trust that can only be accessed by the minor’s parents. Periodic payments are a good way to ensure that the money is properly spent on essentials for the minor’s future.
They can also be used for future educational expenses and ongoing medical care. This type of arrangement can be a valuable way to keep the minor’s medical care costs low, while preserving eligibility for public benefits like Medicaid.
Another benefit of a structured settlement for a minor is that it is tax-free, meaning the proceeds are not subject to income tax. The compounding interest on the funds can help increase the account’s value over time.
It is also important to note that a minor can sell the rights to their structured settlement for a lump sum after they turn 18 years old. This can be done under certain circumstances, but a guardian ad litem is generally required to review the sale and decide that it is in the best interests of the minor.
The sale of a structured settlement can be a complex process, so it’s important to have an experienced attorney guide you through the process. In addition, a trusted financial advisor can work with you to find the right solution for your child’s situation and goals.
A good lawyer and an experienced financial planner will be able to provide you with options that are tailored to your child’s unique circumstances. They’ll discuss a variety of payment options, and make sure that the funds are spread out to meet their individual needs.
Tax-Free
If your minor child has received a structured settlement from an injury or wrongful death lawsuit, you should know that these payments are tax-free. This income is exempt from federal and state taxes as long as they’re disbursed over time.
There are many different options for receiving tax-free money through a structured settlement. These include Structured Settlement Annuities, Special Needs Trusts and Preservation Trusts.
A Structured Settlement Annuity is one of the most popular choices for settlement awards involving minors because they can provide tax-free income over an extended period of time. Like Special Needs Trusts and Preservation Trusts, Structured Settlement Annuities can also provide guaranteed interest rates and projected returns that will not change with market conditions.
When your child receives a structured settlement, you should be sure that the settlement is arranged in a way that allows you to protect your child’s best interests and minimize the risk of making bad financial decisions. This is especially important if you have concerns about how your child will spend the money or if you’re concerned that a lump sum of money could be misused.
The first step to arranging a structured settlement is to get an independent professional to review the settlement agreement and the terms of the settlement. Afterward, you can select a payment schedule that’s right for your family.
In addition to ensuring that your child has the most control over their money, structured settlements also help prevent frivolous spending and ensure that there’s money left over when your child turns 18. When you choose a structured settlement, you’ll have the peace of mind knowing that you’re making the right choice for your family.
If you’re considering a structured settlement, it’s best to speak with an experienced attorney who can help you navigate the legal and financial aspects of the settlement. He or she can explain how these payments are designed to protect your child’s best interests and ensure that you’re making the most of your settlement award.
Deferred Payments
Managing a significant cash settlement, especially when the victim is young, is a challenge. Insurance industry statistics indicate that 25 to 30 percent of accident victims completely dissipate their settlements within two months of recovery and 90 percent of them spend it all within five years.
For this reason, it is essential that settlement funds be carefully managed and not wasted. These are often the most challenging periods in a child or minor ward’s life and even financial savvy parents can make mistakes.
A settlement is also an opportunity for a victim to recoup lost wages, future medical expenses and other damages. However, these are only available to claimants who have been injured as a result of another person’s negligence or misconduct.
To protect the funds from mismanagement, many plaintiffs and their attorneys opt for a structured settlement rather than a lump sum. This is because a structured settlement can provide the benefit of deferred payments that are tax-free and can be used for a variety of purposes.
When a client decides to receive structured settlement funds, we work closely with them to determine their personal needs. Using this information, we design the appropriate structure and select the life insurance companies that will best meet their needs.
While interest rates are still low, a Structured Settlement can offer higher returns than bank accounts. This can be important for a client who is in need of extra cash for a down payment on a home, or to pay income taxes.
Our firm has extensive experience in the structured settlement industry and can help clients secure the highest annuity rates possible. We can also compare annuity benefits from different life insurance companies to determine which one is the best fit for their particular situation.
We can also customize the payout schedule to be more favorable for the client. For example, we can design a payment schedule that decreases as the minor ages or if the beneficiary becomes a dependent.
Ultimately, the decision is up to the client and their attorney, but structured settlements can provide a more favorable outcome for both parties involved in a minor’s case. It is important to consult with a qualified settlement planner and personal injury attorney who understands the intricacies of personal injury law.
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