When a child is involved in a personal injury claim, the settlement process takes on a unique set of considerations. Unlike adults, children are not legally capable of managing large sums of money, which raises concerns about their financial security and future well-being. In these situations, structured settlements often emerge as a preferred solution. This article will explore the reasons why structured settlements are recommended for children in personal injury claims, highlighting the benefits, risks, and key considerations for parents and guardians.

Understanding Structured Settlements

A structured settlement is a financial arrangement where a plaintiff receives their compensation in periodic payments rather than a lump sum. This type of settlement is particularly beneficial for children involved in personal injury claims. Here's why:

• Long-Term Financial Security: Structured settlements provide a reliable stream of income over an extended period. This approach ensures that children receive funds for future needs such as education, medical care, and living expenses.
• Protection from Mismanagement: Minors are not legally capable of managing large sums of money. Structured settlements prevent potential mismanagement or misuse of funds, ensuring that the settlement serves its intended purpose.
• Tax Benefits: The payments from a structured settlement are often tax-free, which is a significant advantage compared to other financial arrangements. This tax-free status can maximize the value of the settlement over time, providing more substantial support for the child's needs.

The Benefits of Structured Settlements for Children

When considering a structured settlement for a child, it's essential to weigh its unique benefits. Here are some of the primary advantages:

1. Financial Discipline and Stability: Children are not financially mature and lack the skills to manage large sums responsibly. Structured settlements introduce a measure of discipline, providing controlled disbursement over the child's developmental years. This approach minimizes the risk of financial irresponsibility and ensures stability.
2. Tailored Payment Schedules: Structured settlements offer flexibility in designing payment schedules that align with the child's anticipated needs. For example, payments can be set up to cover immediate medical costs, increase during college years, or provide support during adulthood. This tailored approach allows for a more strategic allocation of funds.
3. Protection Against Market Volatility: Unlike investments that are subject to market fluctuations, structured settlements provide guaranteed income. This stability is especially important for children who cannot afford the risks associated with market-based investments. A guaranteed payout ensures that the child will have access to necessary funds regardless of economic conditions.
4. Court Approval and Oversight: In many cases, structured settlements for minors require court approval, adding a layer of protection. The court ensures that the settlement is in the best interest of the child and that the funds will be managed responsibly. This oversight can prevent potential abuses and safeguard the child's financial future.

Key Considerations for Parents and Guardians

While structured settlements offer numerous benefits, parents, and guardians should consider several factors before agreeing to such an arrangement:

• Inflation and Future Costs: The value of money decreases over time due to inflation. It is crucial to structure payments in a way that accounts for potential increases in costs, especially for long-term needs like education and healthcare. Consulting with a financial advisor can help in planning for inflation-adjusted payouts.
• Medical and Special Needs: If a child has ongoing medical needs or disabilities resulting from the injury, a structured settlement can be customized to provide for these specific requirements. It's essential to work with a settlement planner who understands the nuances of special needs trusts and medical expense forecasting.
• Flexibility and Access to Funds: One of the criticisms of structured settlements is the lack of immediate access to large sums of money in emergencies. Parents and guardians should ensure that the settlement structure includes provisions for accessing funds if unforeseen circumstances arise.

Potential Risks and How to Mitigate Them

While structured settlements are generally favorable, there are potential risks:

• Inflexibility: Once a structured settlement is established, it is often difficult to modify. This rigidity can be problematic if the child's needs change over time. However, this risk can be mitigated by carefully planning the settlement structure to include flexibility where possible.
• Reliance on Insurance Companies: The payments are usually backed by insurance companies, which means the financial stability of these companies is critical. Parents should ensure that the insurer is reputable and financially sound. Diversifying among multiple insurance companies can also reduce this risk.
• Lack of Investment Growth: Unlike other investments that have the potential for higher returns, structured settlements do not grow beyond the agreed-upon terms. This conservative approach may not keep pace with inflation over long periods. To address this, parents may consider a blended strategy that includes a structured settlement alongside other investment options.

Conclusion

Structured settlements offer a prudent and protective financial strategy for children involved in personal injury claims. By ensuring steady, tax-free income over time, they provide a secure financial foundation that addresses both immediate needs and future uncertainties. Parents and guardians should work closely with legal and financial professionals to tailor a settlement that best serves the child's interests, safeguarding their financial future while providing flexibility to adapt to life's unexpected challenges.

Need Legal Help? Brandon J. Broderick, Attorney at Law is One Phone Call Away

Navigating personal injury claims for minors can be challenging. Fortunately, you don't need to do it alone. The experienced personal injury lawyers at Brandon J. Broderick, Attorney at Law, are available 24/7 to help you understand your legal options, gather necessary evidence, and build a strong case to secure the settlement you deserve.

Contact us now for a free legal review.