Whenever a minor gets involved in any lawsuit or becomes an injured claimant, the court takes a highly protective approach towards their interests. The settlement of child claims under $15,000 does not require court approval. This typically involves a proceeding which is named minor’s compromise, court confirmation, guardianship, or court approval. Some of the general concerns of the court are that the:
• Child should be awarded the due compensation
• Money should be invested wisely so that it grows over the course of time
• Parents or guardians refrain from taking, using, and investing the awarded money for personal benefits
• Child doesn’t have access to all the money at once so he or she doesn’t lose it or spend it all
The structured settlements lower the risks that any individual might misuse, withhold, or embezzle a large amount of money which belongs to the claimant. As per the laws of Florida (as well as almost all states), parents or guardians cannot take all the funds of any large settlement (which is typically above $5,000) on behalf of their minor child for investment purposes.
Generally, a part of the money is put away in a blocked account, which can be accessed only by the parents or guardians upon court order. This account gets earmarked for paying current medical bills among other expenses which have been incurred due to the accident or might be incurred in future. Whatever that remains is used for setting up a structured portion of this settlement. This portion will make up a whole series of payments to the child beginning when he or she reaches 18 years of age, either for life or for a specified number of years.
The settlement money for an injured child was previously placed entirely in a blocked bank account to ensure safety. However, this account offers quite little interest, while the taxes need to be paid on this interest. Any structured settlement makes use of a treasury bond or annuity for growing the money. This is also done to keep the money away from any parent or guardian’s reach, and to make sure the proceeds are exempted from income tax.
For instance, suppose that an insurance company decided to settle a child’s case with structured settlement. They did so by buying an annuity for about $30,000 along with a lump sum up front for covering the current medical bills and attorney fees, as well as a lump sum to cover any medical bills in the future. This lumped sum will be going to a blocked bank account. On the other hand, the $30,000 can be used for purchasing structured settlement annuity from any life insurance firm.