Minor Settlements: Why is Court Approval Required?
Minors lack legal capacity to make binding decisions. So, when a minor is injured in an accident, an attorney may be retained and obtain a final settlement offer. However, after that, the settlement, unless it is very small, must be approved by a court. What happens if, after she turns 18, she says she was more seriously injured than anyone knew and both the insurance company and her parents sold her short? That's why courts step in to review settlements for minors, making sure they are fair and that the funds will be protected. Most states have their own procedure for approving minor settlements. In New Hampshire, if the settlement is $10,000 or less you don't have to do anything. This law doesn't apply. But, amounts over that must be submitted to court for approval. District and Superior Courts have authority to approve the settlement. If a case is pending, then a settlement petition is filed there. However if no lawsuit has been filed, then the out of court settlement referred to in the question now goes to court by way of a settlement petition filed in either District or Superior Court. These courts require certification that the Probate Court has appointed a guardian of the estate of the minor to accept the settlement funds and to be responsible for the funds. This will usually be a parent, "next friend or other person" who will receive the settlement money and be responsible. That means every year they must file an accounting, showing the court that the funds are being handled properly. In calculating whether or not the settlement is over $10,000 and subject to this procedure, all sums including attorney fees, court costs and other expenses related to the claim including medical expenses must be included. A medical report must be submitted detailing the extent of the minor's injuries and the future prognosis. Finally, if a structured settlement is involved calling for payouts, for example, over college years, a certified public accountant or other financial professional must file an affidavit showing present value of the plan. If you're doing an annuity, prepare to file a ream of other paperwork. If all of this seems only to drag out the process, consider this. Once I had a client in her early 20s come to my office. She remembered a serious accident in her elementary school years. There'd been a settlement. But, she never saw any of the money and her parents had no answers. It was not a happy day for any of us because the parents are in fact liable for diverting their child's settlement money. So, the process for approving minor settlements slows things down and reads in terms of protecting the minor. But in the long run, it also protects parents.