Structured Settlements for Minors: What Parents Need to Know

If your child has a structured settlement and you need to access those funds for their medical care, education, or other needs, you are not alone. A parent or legal guardian manages the settlement until the child turns 18, and in some cases, a guardian can petition the court to sell payments early if it serves the child's best interest. Here is what the process looks like and what judges expect.

How Structured Settlements for Minors Work

A structured settlement for a minor is created when a child receives compensation from a personal injury lawsuit, medical malpractice claim, or other legal action, and the court orders that the award be paid as periodic payments over time rather than a single lump sum. Courts strongly prefer structured settlements for minors because they protect the child from having a large sum mismanaged or depleted before the child reaches adulthood.

The settlement is funded by an annuity purchased from a life insurance company such as MetLife, Allstate/Everlake, John Hancock, or Corebridge. The insurance company issues the annuity and makes payments directly to the child (or to the guardian on the child's behalf) according to the schedule established in the settlement agreement.

Payments may begin immediately or be deferred until the child reaches a specific age, often 18 or 21. Common payment structures for minor settlements include:

• Monthly payments for ongoing living and medical expenses
• Lump sums at milestone ages (18, 21, or 25) designed to fund education, a first home, or the transition to independent living
• Education-specific payments timed to coincide with expected college enrollment
• Combination structures that provide small monthly income now plus larger lump sums later

The court retains jurisdiction over the settlement to protect the minor's interests. Any change to the payment structure, including a sale of payments, requires a new court proceeding. For a broader overview of how structured settlements work, see our guide on what a structured settlement is.

Who Controls a Minor's Structured Settlement?

A minor cannot legally manage their own financial affairs. The settlement is managed through a hierarchy of oversight designed to protect the child:

1. The court retains ultimate oversight over the settlement. Any significant changes, including accessing principal, modifying payment terms, or selling payments, require court approval.
2. The parent or legal guardian manages the settlement on the child's behalf. This person has a fiduciary duty to act in the child's best interest, not their own. The guardian handles day-to-day decisions about how settlement funds are used for the child's care.
3. Blocked accounts are required by some courts. A blocked account is a bank account where settlement funds are deposited but cannot be withdrawn without a court order. This prevents misuse, even by well-intentioned guardians.
4. A guardian ad litem may be appointed by the court in some states. A guardian ad litem is an independent attorney who represents the child's interests separately from the parent. This is particularly common in states that require additional safeguards for minor settlement transactions.

The parent or guardian does not own the settlement. They are custodians with a legal obligation to manage the funds for the child's benefit. Misusing a minor's settlement funds can result in the guardian being removed, held in contempt of court, or facing criminal charges.

Can You Sell a Minor's Structured Settlement Payments?

In most states, yes, but the process requires court approval and a higher burden of proof than a standard adult sale. The sale must be in the minor's best interest, not the parent's or guardian's convenience.

A judge evaluates whether the sale proceeds will be used for the child's welfare. Purposes that courts view favorably include:

• Medical expenses and ongoing treatment costs
• Specialized education or tutoring needs
• Housing modifications or disability accommodations
• Therapeutic equipment or assistive technology

Many states require the appointment of a guardian ad litem to independently evaluate the proposed sale and provide a recommendation to the court. The judge may approve a partial sale, where some payments are sold to address immediate needs while the remaining payments are preserved for the child's future. Some judges are reluctant to approve sales of minor settlements, especially if the stated purpose does not clearly benefit the child.

Parents in this situation are often stretched thin financially due to their child's medical needs. The court approval process exists to protect the child, and an experienced purchasing company can help families prepare a petition that clearly demonstrates the child's need.

What Judges Look for When Approving a Minor's Sale

Judges apply heightened scrutiny to structured settlement sales involving minors, and we have seen firsthand how closely they examine every detail. Under each state's Structured Settlement Protection Act (SSPA), the court must find that the transfer is in the best interest of the payee. For minor payees, judges typically evaluate these specific factors:

1. Purpose of the sale. Medical expenses, special education needs, therapeutic equipment, and disability accommodations are viewed favorably. General living expenses or debt payoff for the guardian may receive more scrutiny.
2. Alternative resources. Has the family exhausted other options? Are there insurance programs, government benefits (Medicaid, SSI), or other funding sources available?
3. Impact on the child's future. Will the child still have sufficient payments remaining for adult needs? Judges are protective of payments structured for college-age milestones.
4. Discount rate. Is the rate reasonable? Judges may reject transactions where the discount rate is unusually high, as this could indicate the deal is not in the child's best interest.
5. Guardian's track record. Has the guardian demonstrated responsible financial management of the child's affairs? Any history of misusing the child's funds will weigh heavily against approval.
6. Independent professional advice. Did the guardian consult with a financial advisor or attorney before agreeing to the sale? Courts look favorably on guardians who seek independent counsel.

The more clearly the petition documents the child's specific need and demonstrates that the sale proceeds will be used for that purpose, the stronger the case for approval. For more on the general selling process, see our guide on how to sell a structured settlement.

What Happens When the Minor Turns 18?

When the child reaches age 18, a significant legal transition occurs. The now-adult recipient assumes full legal control of the structured settlement. The former guardian no longer has authority over the payments, and no further court oversight of the settlement is required.

At 18, the recipient can:

• Continue receiving payments on the original schedule without any changes
• Sell some or all payments through the standard adult SSPA process, with no guardian involvement needed
• Change the beneficiary designation on the annuity contract
• Contact the issuing insurance company directly about their account

Some settlements are specifically structured with deferred lump sums at age 18, 21, or 25 to provide milestone funding for education, a first home, or starting a business. These milestone payments are a common feature of minor settlements because they provide resources at critical transition points in a young person's life.

If the child has a disability and cannot manage their own financial affairs at age 18, the guardian can petition the court for a conservatorship. A conservatorship extends the guardian's control beyond age 18, typically until the court determines the individual can manage their own affairs or for the individual's lifetime if the disability is permanent.

Protecting a Minor's Settlement: Options Beyond the Standard Structure

Courts and families have several tools available to add additional layers of protection to a minor's structured settlement:

• Special needs trusts. If the child has a disability, a special needs trust (also called a supplemental needs trust) can hold settlement proceeds without affecting the child's eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). The National Academy of Elder Law Attorneys (NAELA) provides resources on special needs planning.
• Structured payment designs. The original settlement can be designed with specific protections in mind: smaller regular payments for current needs combined with larger deferred lump sums for college and adult milestones.
• Court-supervised trusts. Some courts order that settlement funds be placed in a trust with a professional trustee who must provide regular accountings to the court.
• Blocked bank accounts. As noted above, these accounts prevent any withdrawals without a court order, providing the strongest protection against misuse.

The right combination of protections depends on the settlement amount, the child's specific needs, and the guardian's circumstances. An experienced attorney can advise on the best structure for each situation.

How CSF Handles Minor Structured Settlement Transfers

CSF's attorney team has experience with the enhanced court requirements for minor settlement transactions. Selling a minor's structured settlement involves more documentation, more oversight, and more careful preparation than a standard adult transfer. Here is what CSF provides:

• Complete legal documentation. CSF prepares all motions, supporting affidavits, and court filings. The family does not need to hire a separate attorney for the transaction in most states.
• Guardian ad litem coordination. CSF works with the court-appointed guardian ad litem to ensure the transaction is fully transparent and that the child's independent representative has all the information needed to evaluate the deal.
• Partial sale structures. CSF routinely designs partial sale structures that provide cash for the child's immediate needs while preserving payments for future milestones. Learn more about partial structured settlement sales.
• Free consultation. CSF evaluates whether selling is the right choice for the child's situation before any commitment is made.

If your child has a structured settlement and you need to access funds for their care, call CSF at (800) 317-3769 for a free, confidential consultation. You can also use our structured settlement calculator to estimate the present value of your child's payments, or request a quote online.

The tax treatment of structured settlement payments from physical injury or sickness cases is preserved even after a transfer. Under IRC section 104(a)(2), these payments remain tax-free to the recipient regardless of whether payments are sold to a third party.

Frequently Asked Questions

Can a parent sell a child's structured settlement?

A parent or legal guardian can petition the court to sell a minor's structured settlement payments, but the sale requires court approval under the state's Structured Settlement Protection Act. The judge must find that the sale is in the child's best interest, not the parent's convenience. A guardian ad litem may be appointed to independently evaluate the transaction.

What age does a child gain control of a structured settlement?

A child gains full legal control of their structured settlement at age 18 in most states. At that point, the former guardian no longer has authority over the payments. The young adult can continue receiving payments, sell some or all of them, or change the beneficiary designation.

Can a minor's structured settlement be put in a trust?

In many cases, yes. Courts sometimes order that a minor's settlement proceeds be placed in a trust managed by a trustee for the child's benefit. This provides an additional layer of oversight and protection. Special needs trusts are particularly useful for children with disabilities, as they preserve eligibility for government benefits like Medicaid and SSI.

What happens to a minor's structured settlement if the parent dies?

The structured settlement belongs to the child, not the parent. If the parent or guardian dies, the court appoints a new guardian or conservator to manage the settlement until the child turns 18. The settlement payments continue on the original schedule regardless of changes in guardianship.

Can a minor's structured settlement be used for education expenses?

Yes. Education expenses are one of the purposes that judges view most favorably when evaluating a petition to access or sell a minor's structured settlement payments. Many settlements are specifically structured to include lump sum payments at college-age milestones (18 or 21).

Is it hard to get court approval to sell a minor's structured settlement?

It is more difficult than selling an adult's settlement. Courts apply a higher standard of scrutiny to protect the child's interests. Judges want to see that the sale proceeds will directly benefit the child (medical care, education, housing) and that the family has considered alternatives. An experienced purchasing company like CSF can help prepare a strong petition.

Do you need a lawyer to sell a minor's structured settlement?

The purchasing company handles all legal filings and court proceedings. That said, some states require the guardian to have independent legal counsel in minor settlement transfers. CSF's attorney team prepares all documentation and guides families through the court process.