Structured Settlements for Minors

When a minor is the claimant in a personal injury settlement, the financial decisions extend well beyond the settlement amount. Attorneys must consider court approval requirements, tax treatment, future financial needs, and how the child will manage settlement proceeds as they enter adulthood.

A thoughtfully designed structured settlement can help address these considerations by providing payments aligned with the minor's anticipated needs while supporting long-term financial stability.

Prospera works alongside plaintiff attorneys and settlement consultants to develop structured settlement solutions tailored to each claimant, providing payment illustrations, product expertise, and supporting documentation throughout the settlement planning process.

Why Structured Settlements Can Benefit Minor Claimants

Structured settlements offer several advantages for minor claimants, particularly when the settlement must provide financial support over many years.

Tax treatment. Under IRC §104(a)(2), qualifying damages received on account of personal physical injuries or physical sickness are generally excluded from gross income. When a qualifying settlement is properly structured, periodic payments may retain this tax treatment.

Longer planning horizons. A child receiving a settlement may have financial needs for decades. Structured settlement payments can be designed around key milestones, including education, medical expenses, adulthood, and ongoing income needs.

Protection against premature spending. Rather than distributing the entire settlement at age 18 or another applicable age, structured settlements can provide scheduled payments over time, helping preserve funds for future needs.

Potential for long-term growth. Traditional fixed annuities provide predictable payments, while market-based solutions such as Prospera's Growth Structured Settlement (GSS) introduce the potential for investment growth over longer time horizons. This may be particularly relevant for younger claimants. Market-based investments involve risk, including potential loss, and returns are not guaranteed.

By combining thoughtful payment design with an appropriate funding strategy, settlement proceeds can address both immediate needs and future financial objectives.

Court Approval for Minor Settlements

Minor settlements are subject to specific legal requirements that vary by jurisdiction. Depending on the state, settlement amount, and case circumstances, courts may require approval to protect the minor's interests.

Courts generally evaluate whether the proposed settlement is fair and serves the child's best interests. This may include reviewing the settlement amount, proposed distribution of proceeds, anticipated future needs, and any structured settlement arrangements.

For attorneys, presenting a clear financial plan can help demonstrate how the proposed settlement addresses the claimant's circumstances.

Prospera supports this process by working with attorneys and settlement consultants to develop payment illustrations, evaluate funding options, and prepare supporting product documentation for court proceedings.

The goal is to give attorneys the information they need to present a well-documented settlement proposal.

Designing Structured Settlement Payments for Minor Claimants

No two minor claimant settlements are alike. The right payment schedule depends on the child's age, injuries, expected expenses, financial support needs, and long-term goals. Prospera helps attorneys explore several approaches.

Deferred Payments Beginning in Adulthood

Payments can be scheduled to begin at age 18 or later, providing financial resources as the claimant enters adulthood. Deferring payments may also create additional time for investment growth in market-based structures, subject to investment performance and the terms of the arrangement.

Payments Aligned with Future Expenses

Structured settlements can provide scheduled distributions for anticipated milestones such as education, medical treatment, housing, or other significant expenses. This flexibility allows for payment schedules that reflect the claimant's anticipated needs rather than relying on a standard distribution schedule.

Long-Term Income for Permanent Injuries

For claimants whose injuries may affect their ability to earn income or live independently, structured settlements can provide payments over an extended period. Traditional annuities can provide guaranteed payments, while market-based structures offer growth potential with associated investment risk. The appropriate approach depends on the claimant's needs and financial objectives.

Payments Designed to Increase Over Time

Some structured settlements can incorporate scheduled payment increases to address changing financial needs and the potential impact of inflation. Prospera can illustrate different payment schedules and funding approaches, helping attorneys evaluate options before finalizing settlement terms.

Structured Settlements and Guardianship Considerations

When minors receive settlement proceeds, courts may require holding funds in restricted accounts, guardianships, or other protective arrangements until the claimant reaches the applicable age of majority. These arrangements can provide important safeguards, but they may also require ongoing administration and eventually distribute substantial assets to a young adult.

Structured settlements offer an alternative for distributing some or all of the settlement proceeds through scheduled payments rather than a single lump sum. Depending on applicable state law and the court's order, this approach may reduce certain ongoing asset management responsibilities while helping preserve funds for future needs.

Prospera works with attorneys to evaluate structured payment options that complement the legal protections established for minor claimants.

When a Special Needs Trust May Be Appropriate

For anyone with significant injuries, disabilities, or ongoing care requirements, settlement planning may also involve eligibility for government benefit programs such as Medicaid or Supplemental Security Income (SSI).

In certain circumstances, a properly established special needs trust can help protect settlement assets while supporting continued eligibility for applicable means-tested benefits.

Coordinating a structured settlement with a special needs trust requires careful consideration of payment timing, beneficiary designations, trust provisions, and applicable benefit program requirements.

Prospera supports attorneys and appropriate trust professionals in evaluating solutions for claimants with more complex financial and care needs. Early coordination matters because decisions made during settlement negotiations can limit future planning options.

Working with Prospera on Minor Claimant Settlements

A minor claimant's settlement should do more than resolve today's legal claim. It should consider the financial needs that may arise throughout childhood, adulthood, and beyond.

Prospera works with plaintiff attorneys and settlement consultants to evaluate payment strategies, develop tailored illustrations, and coordinate the documentation necessary to implement structured settlement solutions.

With market-based alternatives, Prospera expands the options available to address each claimant's unique circumstances.

For younger claimants with longer financial horizons, GSS offers an additional opportunity to consider market participation as part of a comprehensive settlement strategy.

Contact Prospera to explore structured settlement options for your minor claimant case.