When your minor child is injured due to the negligent actions of another, you may feel outraged, heartbroken, and extremely worried about what your child’s future may hold. Further, you may be thinking about filing a personal injury claim on your child’s behalf, but may have questions regarding what will happen to the money your child recovers based on the fact that they are a minor.
It is important to note that if the child is the victim in a personal injury case, then most of the funds recovered (with some exceptions, as will be discussed in more detail below) belong to the child. If you are pursuing a personal injury case to recover compensation for your minor child, consider the following —
What Happens to My Child’s Recovery Money?
A very common question is, “If my child is injured, how do the funds get handled when we make a recovery?” And the answer in California is almost always the same: the funds will probably go into what is called a “blocked account” after a judge approves the settlement. Whenever a minor is involved in a case, we go to court and we get a judge to approve the settlement – this is called a minor’s compromise. As a general rule, the judge will order that funds are put into a separate blocked account for the child and no one can touch it without court approval.
However, a blocked account is not the only way that funds can be stored that are recovered for a minor child in a personal injury settlement. In fact, the state of California provides a number of options for the safekeeping of a child’s money.
What Is a Blocked Account?
A blocked account is very simple, and is often selected because it is the easiest to establish, and the most straightforward to manage. A blocked account is just a bank account into which a child’s funds are distributed, and, as stated above, cannot be accessed by the parents (or anyone else), or by the child until the child is 18.
While blocked accounts may be easy to establish, they yield very low returns, and because they provide the minor with full access to the money upon turning 18, parents may not want money stored in this account type. Parents are often worried that their 18-year-old will squander the thousands of dollars kept in the account, having not yet developed the financial responsibility to manage such a sum of money.
While funds are blocked, it is important to note that during the time that the funds go in and the time the child turns 18, the parents can always ask us to petition the court in order to take some of the funds out for special educational needs of the child, or medical needs, or anything of that nature. And we do that at no charge whatsoever until the child turns 18.
Alternatives to a Blocked Account
There are some alternatives to a blocked account, although ultimately how the child’s funds are stored is the decision of the court. One option is a single-premium deferred annuity. Essentially, funds are made in a single, lump sum payment to the single-premium deferred annuity, and in exchange, the beneficiary receives a guaranteed stream of income for the remainder of their life. Annuities are also beneficial because interest growth is compounded, and there is no tax until withdrawal.
Another option for storing a child’s funds is a special needs trust. A special needs trust may be a wise idea when the injury sustained by the child has resulted in a disability, and because of this disability, the child will be able to qualify for public resources (such as Social Security benefits, Medicare, etc.). If the child were to be given full access to the money in a blocked account, these funds would disqualify them from government benefits that they otherwise would be eligible for. By placing funds in a special needs trust, funds can be managed by the trustee to purchase things that the child/adult needs, while also not affecting their eligibility for benefits.
If a settlement is for less than $5,000, then the money will probably just be distributed to the parents for the parents to hold for the child until the child is 18.
Do Parents Receive Any Part of a Settlement in a Child Personal Injury Claim?
A common misconception is that all funds received in a settlement belong to the injured child and therefore cannot be used by the parents. However, this is not true; while noneconomic damages, such as the value of the child’s pain and suffering, disability, disfigurement, etc. certainly do belong to the child, as may some economic damages, such as the value of the child’s future lost wages, a large portion of economic damages may also belong to parents. For example, if parents have already paid hundreds or thousands of dollars in medical bills, or will pay medical bills up until the period of time that the child turns 18, then these damages belong to the parents. Parents have the right to sue for medical expenses incurred by their child, and should do so. Attorneys’ fees, lost income incurred by a parent due to caring for a child, or other out-of-pocket expenses directly related to the child’s case may also be pursued.
We Help You to Understand Your Options When Your Child Is Injured
If your child is injured, understanding your options for filing a personal injury claim on your child’s behalf, and for receiving funds for your child’s injuries and management of those funds, is important. At the offices of GJEL Accident Attorneys, we have the experience and knowledge you are looking for. To schedule your free consultation with our team, please contact us by phone or online today. We are the advocates your family needs.