If a minor child wins a personal injury settlement from an accident, then the parents are usually given control of the award money until the child reaches a certain age. If the parents of the child are divorced, the matter becomes a bit more complicated.
Which Parent Manages the Money?
The parent who was awarded custody of the child will usually be appointed as becoming responsible for managing a child’s settlement money. If the parents have joint custody, then the parent with primary custody will usually be responsible for managing the money. The courts, however, are allowed to appoint the non-custodial parent with the responsibility of managing the money. The court is acting on behalf of the child, so they will base their decision on what is in the child’s best interest.
Personal Injury Settlements for Children
When a child wins a large personal injury settlement it is usually awarded in two parts.
- The first installment, which is commonly referred to as a lump sum, is given to compensate for the initial and immediate financial damages, including legal expenses and medical bills.
- The second installment of money will usually be placed into a trust fund which cannot be accessed by the child until they reach 18 years of age. Before then, the parents are not even able to access the money, unless otherwise authorized by the court for some reason. This money is typically set aside to cover future medical expenses or pain and suffering that could affect the child throughout their life. Additional awards are also grouped in the second installment.
Fiduciary Duty of the Parent
In the event that a child wins a personal injury settlement, the parent or parents have a fiduciary duty to protect the financial well-being of their child, whether they are married of not. It may be the job of the parent to manage the the initial expenses from the injury. They then must preserve the award money for future expenses related to the injury. The courts may authorize access to the money in order to cover such expenses.
Even though a parent is responsible for managing the money, it’s important to remember that the award money legally belongs to the child. The courts have authorization to protect parents from mismanaging a child’s money.