The Minor’s Settlement – Extra Step(s) the Law Requires to Settle a Minor’s Injury Case

By Thomas on February 13, 2020

Most people know that when they are injured due to the negligence of others, they will either settle with the insurance company, or go to trial.  Settlement prevents surprises. But if one of the injured parties is under 18, the process is slightly more involved.    

Step 1 – Court Approval  

Where a minor (a child under 18) is involved, the parent will have negotiated the settlement, and there will be one or two added steps.  The first step is that the court must approve the settlement. This is required in all minor’s settlements and protects both the minor and the insurance company.  Minors are generally deemed “incompetent” under the law. That means: (1) they can’t enter contracts and (2) they can’t file lawsuits.  

  1. Lawsuits – Because they can’t file a lawsuit, the statute of limitations doesn’t start to run until they turn 18.  Absent a settlement and approval process before then, the insurance company would never be inclined to settle until then.  
  2. Binding Contracts – The rule declaring with contracts with minors are “void” is there to protect them.  They simply don’t have the real-life experience and maturity to make certain decisions.  

The court’s settlement approval process honors both concerns and still allows earlier settlement.  In a personal injury claim, the agreement to settle will be reached with the parents. But the court will have to be consulted so the judge can review and evaluate both the injury claim and the settlement amount to make sure it is fair to the minor.  As long as legal counsel is involved, this would rarely be a problem. But the hurdle must be cleared.  

Step 2 – Guardianship  

For smaller settlements ($10,000 and under), the court’s approval of the settlement is the end of the process.  The money will be released and paid to the child’s parent(s) to use for the child. The amount doesn’t justify court monitoring to make sure the child gets the benefit.  Where the amount is greater than $10,000 however, there is an added step of guardianship. Establishing a guardianship creates a legal relationship with statutory rules that must be followed.  The money must be kept separate from the parents’ own money (i.e. no “comingling of funds”), and it must be safeguarded for the exclusive benefit of the minor. To ensure this requirement is followed, the guardianship statutes require that the guardians to report all spending to the court through a periodic “accounting.”  This way, the court can monitor the child’s monies and make sure the child receives the benefit.  

There is a statutory exception to the guardianship requirement.  Indiana Code § 29-3-4-1 provides that where there is only a “single transaction,” the matter can be presented to the court as a request for a “protective order.”  That is, the parent would request that the court enter a single order for a single transaction, leaving no other issues requiring court monitoring. This is less common, but an example might be the purchase of a structured settlement, where the child doesn’t receive funds until after turning eighteen.  In that case, no one will be accessing the settlement money, and there would be no need for an accounting. This is something parents may wish to employ when counseled on it by the attorney.