Structured Settlements for Minors
Ensuring Your Child’s Financial Security
Several Financial Options Exist for the Settlement of a Child’s Case
- Usually a money market account or equivalent over which the court maintains some control. The money typically earns a modest interest rate and the earnings are taxed on an annual basis.
- Costs are involved in setting up the guardianship; along with annual fees for accounting and filing.
- The guardian has little control over the money; court approval is required for any change in the account.
- Professionally managed by a bank trust department, independent trustee, or independent financial advisor.
- Annual trust administration fees exist, will likely require ongoing management fees.
- Any gains are potentially taxable.
Structured Settlement Annuity
- Allows for the design of a tax-free, guaranteed, reliable stream of payments tailored to your child’s specific needs.
- Will earn a competitive rate of return on investment, and according to section 104(a)(2) of the IRS code, the earnings on settlement annuities from personal injury cases will not be taxed as income.
- Once the rate of return is determined, it will never decrease. However, payments can be structured to increase with a cost of living adjustment.
- No ongoing maintenance or management fees.