How Should Structured Settlements Be Set Up for Children and Older Adults?

After a personal injury claim is settled, many plaintiffs will receive their settlement in a one-time, lump sum payment, but this isn’t the only option. A plaintiff may opt for a structured settlement instead, which has several benefits, especially for children and older adults. How should structured settlements be set up for children and older adults? Settlements can be structured so that a child doesn’t receive a large sum on their 18th birthday; instead, they can be distributed over several years. Older adults may also benefit from structured settlements being distributed post-retirement, providing them with regular income.

What Is a Structured Settlement?

A structured settlement is flexible when it’s being discussed between a plaintiff and the insurance company for the defendant — namely when payments will start, how the money will be distributed, and whether there’s a partial lump sum payment upfront. However, it is impossible to change the terms of a structured settlement once the plan is purchased, so plaintiffs need to know the type of structured settlement best for them. Plaintiffs may ask for money to be distributed immediately, or they may benefit from waiting for payments to start for several years. An attorney can help determine the amount and timing of the settlement payments that make the most sense for a plaintiff’s individual needs. Structured settlements are typically tax-free and can provide financial security for plaintiffs for life. 

As noted above, one of the benefits of structuring a settlement is that the timing and amount of each payment can be varied depending on a plaintiff’s specific needs. For example, a plaintiff may choose to start with a lower payment amount and increase it over time — or vice versa. Structured settlements are typically paid through annuities, which is a contract purchased from insurance companies. Virginia has statutory requirements concerning the financial size of the insurance companies that can issue structured settlements, the goal being to lessen the risk of the annuity issuer going bankrupt.    

Structured Settlements vs. Lump Sum Settlements

Knowing whether you’ll benefit from a structured settlement versus a traditional lump sum payment depends on a variety of factors. Structured settlements ease the fear of spending money too quickly or irresponsibly because you won’t have access to the entire settlement. Additionally, you can remain confident that you’ll have guaranteed income over the length of the settlement and the total amount received from a structured settlement is higher as the money is earning interest as it is being paid out over the course of the structure.  On the other hand, a lump sum settlement may be a more attractive option if you have significant upfront costs to pay and want to take care of them. You may also opt for a lump sum payment if your medical costs might increase over time. Determining whether a structured settlement is your best option is a highly variable decision, so working with an attorney with experience with different settlement types who can advise you on the best path forward is essential. 

Structured Settlements For Children and Older Adults

Structured settlements often result from personal injury lawsuits where someone has been harmed. While no amount of money will undo the pain and harm that a plaintiff experiences, it can help turn a negative situation into a positive one. For a minor, a settlement can be structured so the child will receive payments to coincide with college tuition, or can be timed to coincide with the purchase of a home in the future.

It is to be noted that the courts must approve any settlement involving a minor to ensure that it is in the child’s best interest. In such situations, the court will appoint a guardian ad litem, typically an attorney with no involvement in the case, to assess the settlement terms to ensure that it will benefit the child. Many settlements involving minors include a structured settlement. Alternatively, the funds can be paid into the court until the child’s 18th birthday. However, there are two downsides to that. First, it does not solve the potential problem of an 18 year old receiving the settlement funds and squandering them. Second, the interest rate paid by Court maintained accounts are very low.   

Structured settlements can also benefit older adults as well.  For example, structuring all or some of a settlement can provide reliable payments to help fund a comfortable retirement. 

The benefits of structured settlements for children and older adults are many. However, to decide whether a structured settlement is the right option for you, it is best to discuss your legal options with an attorney familiar with structuring settlements. We at  Curcio Law have years of advising our clients regarding structured settlements and are happy to schedule a free consultation to discuss them with you.  Call or text 703-836-3366 or complete our online form today.