As a parent, the last thing any of us ever want to see is one of our children injured. The sad reality is that no matter how hard we try to protect them, sometimes things happen that are entirely out of our control. When injuries do occur through the negligent actions or inactions of another, personal injury lawsuits often ensue. This article addresses the question of what should transpire if a young adult or infant plaintiff (by which I mean any adolescent under the age of 18) successfully settles a claim?

When personal injury lawsuits are settled, what typically transpires is that the parties mutually agree to discontinue the legal proceeding that was initiated; the injured party signs a release concerning any future claims for the damages sustained; and money toward the settlement ultimately changes hands. Today I’m focusing on the last part of the equation – namely, how the money should be doled out.

When the plaintiff in a personally injury action is under the age of 25, some serious consideration needs to be given to how any settlement proceeds they receive should be handled. As a general proposition, I think most readers would probably agree that it’s unwise to write a sizeable settlement check over to a minor or an immature 18 year old with no real sense of what a dollar means or how it should be used.

Even if you think your young adult is mature enough to handle the responsibility of coming into a lot of money, I’d recommend pausing for a moment and re-thinking that position. Keep in mind that these settlement proceeds are not only intended to make your child whole for injuries suffered by another, but those funds will hopefully serve as a nest egg to get their adult lives started out right. Thinking back to our own adolescence might serve as a good reminder about how immature many 18 to 25 year olds can be. Having a modicum of faith in your child’s maturity is one thing, but I wouldn’t bet their future on it.

All of that said, there is an alternative to simply handing the cash over. Whether we’re talking about a true minor (again, someone under the age of 18) or just a younger adult, a very popular and effective way of accepting settlement funds while providing for a child’s future is a structured settlement.

What is a structured settlement? A simple definition of the term is a financial or insurance arrangement that one enters into to settle a personal injury claim wherein the claimant agrees to accept periodic payments for a certain length of time, in exchange for the suit being withdrawn. These structures are typically handled through annuities that the injured party (or her representative) can craft to suit their respective needs. The manner in which these payments can be structured is limited only by the creativity and needs of the injured party. It can be anything from monthly payments to annual payments to specific lump sum date specific payments (i.e., one that concurs with a tuition payment).

The advantages of accepting settlement proceeds for a minor through a structured settlement are two-fold. The first main advantage is that it offers a higher rate of return than simply leaving the money in a bank. Especially in today’s financial environment where interest earned on bank accounts is virtually non-existent, a sound investment strategy for any settlement proceeds should be foremost on a plaintiff’s mind. Where children are concerned, anything that can be done to grow those proceeds long-term is a wise move. Second, structures help protect against the very thing discussed earlier; keeping an immature young adult from wasting the settlement funds. By taking the money out of a child’s hands and paying it out over time, parents can put their own minds at ease while helping to ensure for their child’s future.

At the end of the day, structured settlements can be very effective tools in helping to plan for a child’s financial future, especially when the settlement at issue is large in nature. That said, structured settlements don’t make sense under every circumstance, so be sure to discuss the option of one with your attorney. Experienced counsel will provide you the necessary insights concerning the utilization of a structured settlement versus the alternatives.

NOTE: While I won’t go into a lengthy discussion, it’s worth making mention of an important fact that I neglected to discuss in this article. Settlements contemplated for anyone under the age of 18 in New York are subject to judicial approval before they can go forward. Depending on the particular circumstances, many courts will outright require that settlement proceeds be placed into a structured settlement before the court will grant permission for the settlement to proceed. Settlements contemplated for those over the age of 18 are typically not subject to judicial approval.