A personal injury settlement involving a child under 18 years of age cannot simply be distributed to the parents or the child. Rather, California law requires that the funds go through a process called a minor’s compromise. This process is codified in California Probate Code sections 3500 and 3600–3613, along with Code of Civil Procedure section 372, and is spelled out procedurally in California Rules of Court 7.950–7.954.
The Three Options
California law requires a judge to independently review the settlement achieved on behalf of the child and approve where the funds will go until the child turns 18 years old. Generally, there are three options for where to place the settlement money:
- A Blocked Account
The money is deposited into a bank account which cannot be touched without a court order. The child typically gains access to the money at age 18. - A Structured Settlement (Annuity)
The settlement funds are used to purchase an annuity that pays the child out over time, starting sometime after the child turns 18. Since the money is invested instead of sitting in an account, typically the settlement amount to the child will grow over time. - A Supplemental Needs Trust
If the child has special needs, this trust can be established to fund items such as therapy or specialized equipment, while preserving the child’s eligibility for public benefits
Depending on the child’s specific needs, more than one of the options above can be used. For example, 80% of the child’s settlement could be used be put into a structure (purchasing an annuity) and 20% of the remaining child’s settlement could be used to establish a special needs trust for the child.
Why This Process is Used
The minor’s compromise process exists to protect children. It ensures that the child has access to his/her full settlement funds when he/she comes of age. At that point, it can be used by the now adult for whatever the person sees fit, including medical care, education, or any other purpose.
This article is for general informational purposes only and does not constitute legal advice. Every case is different — please consult with an attorney about the specifics of your situation.
