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Structured Settlements For Minors
Parents can file a personal injury lawsuit on behalf of children that were injured or otherwise negatively affected by an incident, and the courts may award children financial compensation in the form of a structured settlement annuity. The parents or legal guardians are typically responsible for control of the funds until the child is 18 years old. This type of payment structure is often preferred by courts because it minimizes the likelihood that the financial award would be used in its entirety before the child reaches the age of 18. However, some parents may face financial challenges after an incident and may prefer that the funds are provided to them in a lump sum amount. With a closer look at what can be done in instances such as this, you will be able to better structure how you spend the funds from a structured settlement annuity.
The Purpose of a Structured Settlement Annuity for Minors
A structured settlement annuity for minors is typically established by the court to provide for an affected party financially. The funds may commonly be used to pay for medical bills, therapy, rehabilitation or other similar expenses for the child. In the event a family member passed away, the funds may be used to replace lost wages that were previously being used to support the child. The funds may also be sufficient to pay for a child’s college education or even to maintain a lifestyle after the child reaches adulthood.
Should You Sell the Annuity or Maintain the Payment Structure?
There are instances when regular payments from a structured settlement annuity are not preferred by the parent. For example, a child may require expensive surgery or have mounting medical bills that need to be paid immediately. Receiving the annuity in regular monthly installment payments is typically not ideal for paying off large medical bills, and this is one common reason why parents consider selling an annuity for a lump sum of cash. However, in most states, selling a minor’s structured settlement annuity before he or she reaches the age of 18 is not legally permitted. In other states, court approval may be required before you can sell the annuity.
When and How to Sell the Annuity for a Lump Sum of Cash
If you have decided that it is more financially beneficial for your family to sell the annuity rather than to maintain the current payment structure, you may be wondering when and how to go about selling the annuity. If your child is close to the age of 18, it may be easier and more cost-effective to simply wait until the child is of age. This way, you may not need to seek court approval and have related legal expenses. If your child is younger, consulting with your attorney is the best first step to take. Once you have legal approval to sell the annuity, you can then work with an annuity broker or consultant to find a buyer for the annuity. Keep in mind that a buyer will typically not offer a full sales price, and instead, you may reasonably expect to receive 65 to 80 percent of the value of the annuity in a lump sum amount.
After a disastrous event occurs, receiving financial compensation from the courts for the event can be highly beneficial. Parents should keep in mind that the financial award was provided to the child rather than to the parents or the entire family. The funds ideally should be spent on medical expenses and routine care for the child, and any remaining funds should be provided to the child when he or she becomes of age.