Children’s Cases: Special rules apply to civil claims brought on behalf of minors

Anytime the plaintiff in a civil lawsuit is a minor (under 18), there are special rules which must be kept in mind.  Minnesota Statutes require certain procedures be followed when handling such a claim.  These rules affect the ethical obligations if the attorney requires court approval of all settlements, and affect the distribution of the proceeds after the case is resolved.

Court Approval of all Settlements

By law every settlement involving a child must be approved by the court.  This law is in place to protect the child's best interests from influence from insurance companies, attorneys, and parents.  It is also in place because minors cannot legally enter a binding contract.

Distribution of Funds

Any funds recovered on behalf of the child are placed in trust until the child turns 18.  These funds cannot be accessed without a court order.  Often they will be placed in a Certificate of Deposit (CD) or other conservative interest-bearing investment account at a local bank.  After turning 18, the funds are at the child's sole disposal and discretion.  Your lawyer will typically provide a referral to an investment counselor or financial institution that can provide advice to make the most of the child's asset once they reach adulthood.

Structured Settlements

A Structured Settlement is an agreement to make a series of partial payments over a period of years, rather than one lump sum payment.  In effect, agreeing to a structured settlement is like agreeing to let an insurance company invest the settlement proceeds.  Structures control the disbursement of proceeds even after the claimant is an adult, thereby reducing the likelihood that the asset will be squandered.  Structures can have significant tax benefits because not only is the original settlement not taxable, but the interest earned prior to disbursement may also be tax free.

An experienced personal injury attorney can help you understand what settlement options will be in the best interest of your child when resolving their civil claims.