A child's personal injury settlement belongs to the child. In many cases, access to the money is restricted until the child reaches the applicable age of majority, which is 18 in most states. Parents and guardians do not automatically own compensation paid for a child's injuries, and their authority to use or manage those funds depends on state law and the settlement arrangements.

Depending on the jurisdiction and settlement amount, court approval may be required, and the money may be placed in a restricted bank account, a structured settlement annuity, a trust, or another legally authorized arrangement. Before the child becomes an adult, withdrawals may require court approval or authorization under the applicable trust, custodial arrangement, or settlement order.

The permitted expenses and procedures depend on state law and how the funds are held. Parents may also be reimbursed for eligible medical expenses they paid, subject to applicable law and any required settlement approval.

When an accident injures a child, families face medical costs and uncertainty at once. A settlement with an insurance company can bring financial recovery, but it may also involve legal steps meant to protect the child's financial future. Minors generally cannot independently enter into binding settlement agreements or releases, so state law provides procedures for representatives to act on their behalf and, when required, for courts to supervise the settlement.

Parents may represent the child during negotiations, but that role does not make them owners of the recovery. Knowing how these protections work helps families plan for ongoing care and work with a personal injury lawyer who knows the court approval process.

Key Takeaways: Who Can Access a Child's Personal Injury Settlement Funds?

• Compensation for a child's injuries belongs to the child, not automatically to the parents or guardians.
• Parents cannot treat a child's settlement as their own money or automatically use it for ordinary household expenses. Permitted expenditures depend on applicable state law, parental support obligations, and the terms governing the funds.
• Many minor settlements require court approval, but the requirements vary by state, settlement amount, and whether a lawsuit has been filed.
• Funds may be held in a blocked account, annuity, trust, or another legally authorized arrangement, with access determined by applicable law and the terms governing the money.
• Early withdrawals may require court approval or authorization under the terms of the trust, custodial arrangement, or settlement order, depending on applicable state law.

Who Controls a Minor's Personal Injury Settlement?

Whether a court must approve a minor's settlement depends on state law, the amount involved, and whether a lawsuit has been filed. Courts supervise many minor settlements, but some states authorize parents or legal guardians to resolve certain claims without obtaining prior judicial approval. Because children generally cannot conduct lawsuits independently, a parent, guardian, or other authorized representative may pursue the child's claim on their behalf. Depending on the jurisdiction and circumstances, that representative may act as a "next friend" or guardian ad litem.

That representative works with the family's attorney to negotiate with insurers, but the representative does not become the owner of the money. Courts oversee many minor settlements under their protective authority, consistent with the doctrine of parens patriae, which recognizes the state's protective role toward children and others who cannot fully protect their own interests. When judicial approval is required, the judge evaluates whether the settlement serves the child's interests rather than the financial interests of the adults involved.

Can Parents Use a Child's Settlement Money?

Parents cannot treat a child's injury settlement as money available for unrestricted family spending. Parents have legal support obligations, but the circumstances in which a child's settlement may be used for support-related expenses depend on applicable state law and the terms governing the funds. A court order or authorized trust arrangement may permit certain expenditures for the child's benefit.

Using the child's money for a mortgage, a family car, or utility bills without proper authorization may constitute misuse of the child's property. When a parent or guardian takes restricted funds without the required permission, the court may order repayment or remove that person from managing the child's estate. Disobeying a court order can also lead to contempt proceedings or other penalties, depending on the state and the circumstances.

Where Are the Funds Held Until the Child Becomes an Adult?

When judicial approval is required, the court order may specify how the child's settlement proceeds must be held or managed. In other cases, state law determines how an authorized parent, guardian, or custodian may receive and manage the funds. Common options include:

• Blocked accounts: The money is held in a restricted bank account, often an insured account, with withdrawals subject to the applicable court order or other legal restrictions.
• Structured settlement annuities: The settlement buys an annuity that pays on a fixed schedule, often starting at or after the child's 18th birthday. Federal tax law excludes damages for physical injuries from gross income when they qualify under 26 U.S.C. § 104(a)(2), whether paid as a lump sum or through periodic payments. However, punitive damages, interest, and certain amounts attributable to previously deducted medical expenses may be taxable.
• Court registry accounts: In some jurisdictions, the clerk holds the net proceeds in an interest-bearing account until the child reaches the applicable age of majority or another date specified by law or court order.
• Special needs trusts: A child with a qualifying disability who relies on Medicaid or Supplemental Security Income may face eligibility consequences from receiving a lump sum. A federal exception for certain disability trusts permits qualifying trusts established for the benefit of a person with a disability before age 65 to receive that person's assets without triggering the federal Medicaid trust-counting rule, provided the statutory requirements are satisfied. These include establishing the trust for the individual's benefit and providing for Medicaid reimbursement from the remaining trust assets after the beneficiary's death, up to the amount required by federal law. Supplemental Security Income eligibility is subject to additional federal resource rules.

Can Settlement Funds Be Used Before the Child Turns 18?

Yes. The circumstances in which settlement funds may be used before the child reaches adulthood depend on applicable state law and the restrictions governing the money. For court-restricted accounts, a parent or guardian may need to petition the court for permission to release a specific amount. The petition may require invoices, medical recommendations, or school evaluations explaining why the expense is necessary. For certain trusts or custodial arrangements, authorized distributions may be made under the governing terms without a separate court petition.

Expenses that may qualify for authorized distributions include:

• Medical treatment related to the injury that insurance does not cover
• Physical, occupational, or mental health therapy
• Mobility equipment, home modifications, or vehicle adaptations for a child with a disability
• Tutoring or specialized schooling needed because of an injury-related impairment

When court approval is required, the judge determines whether the requested withdrawal is justified and may authorize the release of an approved amount. When funds are held in a qualifying trust or other authorized arrangement, distributions are governed by the applicable legal requirements and the terms of that arrangement.

How Court Approval of a Minor's Settlement Works

Many minor personal injury settlements require judicial approval before they become legally binding, but the requirements vary by state, settlement amount, and whether a lawsuit has been filed. Some states permit parents or guardians to settle qualifying claims without judicial approval. The name for a court approval proceeding varies by state, and you may hear it called an infant compromise, a friendly suit, or a minor settlement petition.

When judicial approval is required, the attorney presents the proposed terms, and the court may review:

1. The total settlement amount and whether it fairly reflects the child's injuries
2. The child's medical prognosis and whether any effects are permanent
3. Medical liens and reimbursement claims that may be payable from the recovery
4. Attorney fees and case costs, to confirm they are reasonable
5. The account, annuity, or trust proposed to hold the child's share

When judicial approval is required, the court may enter an order approving the settlement if it determines that the proposed terms adequately protect the child's interests. The legal effect of the approved settlement and release depends on applicable law and compliance with the required procedures. This extra step is one reason a personal injury settlement can take longer when the injured person is a minor.

How Claims Involving Children Are Split Between Parent and Child

A child's injury may create two related claims. The child generally owns the claim for personal injuries, including pain and suffering, permanent effects, and loss of future earning capacity. Depending on state law, the parents may have a separate claim for medical bills incurred while the child is a minor, or those expenses may be recoverable through the child's claim. The allocation of settlement proceeds between the child's recovery, any separate parental claims, enforceable medical liens, insurer reimbursement rights, attorney fees, and other authorized expenses depends on applicable law and the terms of the settlement, including any required court approval.

Personal injury filing deadlines vary by state, type of claim, and defendant. Some states suspend or extend certain filing deadlines while the injured person is a minor, but the duration and availability of those protections differ. Special rules may apply to medical malpractice claims, claims involving government entities, and other categories of cases. Parents' separate claims may also be subject to deadlines that are not extended because of the child's age, so families should not assume they have extra time.

What Evidence Supports a Child's Injury Claim?

A fair settlement depends on showing how the injury will affect the child over a lifetime. Growth plate damage, nerve injuries, cognitive changes, and facial scarring can have effects that take years to measure. Clear fault and the available insurance limits also shape a claim's value.

Documentation that tends to carry weight includes:

• Complete medical records, including emergency room notes and imaging
• Reports from treating specialists on prognosis and effects on growth
• A life care plan prepared by a qualified planner, often paired with an economist's estimate of future costs
• Photographs showing how scars and other injuries heal over time
• School records and teacher observations showing changes after the accident

Gathering this material early supports getting the best personal injury settlement and provides documentation that may be relevant to any required court review.

Frequently Asked Questions

What Happens When the Child Turns 18?

When the child reaches the applicable age of majority, access to settlement funds depends on state law and the terms of the account, trust, annuity, or court order. Certain restricted accounts may become available at that point, while others require additional documentation or court authorization. Trusts and structured settlements may continue to restrict or schedule distributions beyond adulthood. If the settlement was structured, payments continue on the schedule set in the agreement, which may extend well past the 18th birthday.

Can a Parent Be Reimbursed for Out-of-Pocket Medical Bills?

Parents may be entitled to reimbursement for eligible out-of-pocket medical expenses paid on behalf of an injured child. Whether reimbursement is available depends on state law, the ownership of the medical expense claim, and the settlement's allocation of damages. When court approval is required, proposed reimbursement to the parents should be disclosed for judicial review. Keeping receipts, explanation of benefits statements, and records of every payment helps document the expenses and may help avoid delays in the settlement process.

Why Do Minor Settlements Require Court Approval?

Court approval is required for many minor settlements to protect the child's interests and ensure that the proposed terms are fair. Judicial review may address the settlement amount, attorney fees, distribution of proceeds, and arrangements for protecting the child's money. When applicable law requires court approval, failing to obtain it may affect the enforceability of the settlement or release. However, some states permit qualifying settlements without judicial approval, so the requirements depend on the jurisdiction and circumstances.

Can Settlement Funds Go Into a College Savings Account?

Occasionally, this is allowed, but it depends on applicable state law, the settlement approval requirements, and the proposed account arrangement. With a 529 college savings plan, the account owner typically controls investment decisions and distributions, which may raise concerns when the funds legally belong to a child. Nonqualified distributions can result in federal income tax on the taxable earnings portion and, unless an exception applies, an additional 10% federal tax on that portion. Because of ownership and withdrawal restrictions, a court may require safeguards or a different arrangement to protect the child's settlement proceeds. Families should discuss any proposed education savings arrangement with their attorney before the settlement is finalized.

Call Brandon J. Broderick For Legal Help

When a child is injured, insurance adjusters sometimes push for a quick settlement before anyone knows how the injury will affect the child's growth and health. Settling too early can leave a child without the resources they will need later.

The legal team at Brandon J. Broderick, Attorney at Law, works with medical providers and life care planners to understand the full scope of a child's losses, negotiates with insurers, and handles the court approval process when required so the settlement is set up to protect your child. Reach out today to schedule a free consultation.