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Little Kids, Big Accidents. Chapter 7: Protect Your Child’s Recovery

Little Kids, Big Accidents:

The Ultimate Guide to Child Accidents in Ohio

CHAPTER 7

Protect Your Child's Recovery

PROTECTING YOUR CHILD'S MONEY WITH A STRUCTURED SETTLEMENT

Attorneys who are experienced at handling child injury cases understand that one of the best ways to help the child in cases involving significant recoveries is to structure the settlement.

A structured settlement pays out a set amount of money to the child over a period of years, typically starting when the child turns 18. In most cases involving a large settlement, a structured settlement makes sense. For instance, let's say a young child is seriously injured in a car accident. The settlement for that case is placed in investments guaranteed to produce a certain amount of money every year once the child is 18. The structure can be set up in a variety of ways. For example, the child could receive a lump sum at age 18, and then get set payments every month or year for a certain period of time. Often, parents will agree to a structured settlement that provides most of the money in yearly sums payable when the child is ready for college so tuition payments can be covered.

Usually, the structure plan is funded by an annuity purchased through a life insurance company. The insurance companies are highly rated and regulated by the state to ensure that the money actually will be there when the child reaches 18.

Structured settlements have a number of benefits. First, the settlement will be worth significantly more than it would have been had it just been paid out at the conclusion of the case. For instance, our office handled a case where the child would have received approximately $60,000 in a lump sum payment, but under the structured plan, she'll receive approximately $160,000 by the time the payments are made. Obviously the numbers change based on the settlement, the age of the child, interest available at the time of the settlement, and the structure plan chosen.

Structured settlements also offer the benefit of providing tax-free income to your child. Personal injury settlements are not taxed, but any income generated by investing the settlement will be taxed. In a structured settlement, the money paid to your child every month or year does not have to be claimed as income. Contrast that to what would happen if you placed your child's settlement in a bank or money market account. While the principle couldn't be taxed, any income generated by the investment could be. So structuring a large settlement makes good sense when considering the tax consequences.

Structured settlements also take a burden off parents who may be unsure how to best manage their child's settlement. Parents will know as soon as they choose a structured settlement exactly how much the settlement eventually will yield and what their child will receive through the periodic payments. That's different than parents who try to manage the settlement on their own because there aren't a whole lot of investment vehicles that guarantee a decent fixed return. And, again, any investment income yielded would be taxable if not structured.

Structured settlements have the further advantage of letting parents set up plans that hedge against unwise expenditures that some 18-year-olds might make. We can probably all relate to the teenaged kid whose biggest priority is buying an expensive car. We've represented plenty of teenagers who can't wait to get their hands on their money to buy a new sports car. While many of us can relate to similar desires when we were that age, most parents would probably not want their child to blow through the cash in less than a year by making those types of impulsive purchases. The structured plan spreads the payments out over time, which preserves the settlement over a period of years.

In some tragic situations, we're not dealing with fun decisions like how a fully recovered kid wants to spend his newfound wealth. Sometimes children are injured so severely that they'll have medical expenses and pain that will last a lifetime. Provided that there's enough insurance coverage to pay for those expenses, a structured plan would be particularly beneficial. Payments made in monthly increments hopefully would be sufficient to pay for a lifetime of treatment and living expenses.

If your child is injured, speak with your attorney about whether a structured settlement makes sense. It's important to make the decision before you accept any settlement money. You can't accept a lump sum payment and then try to enter a structured plan because you lose the tax-free benefit that makes structures so appealing.


If you or someone you know has a child who has been injured in an Ohio child accident, you need information. Contact our Ohio child accident injury lawyers immediately for your free copy of Little Kids, Big Accidents by calling 800.637.8170.


We represent Ohio personal injury clients from Toledo, Maumee, Delta, Port Clinton, Bowling Green, McClure, Napoleon, Helena, Fremont, Fostoria, Tiffin, Cygnet, North Baltimore, Ottawa, Findlay, Carey, Bryan, Sandusky, Swanton, Perrysburg, Grand Rapids, Waterville, Liberty Center, Portage, West Millgrove, Woodville, Genoa, Gibsonburg, Findlay, Risingsun, Deshler, Hamler, Oregon, Sylvania, Delta, Weston, Oak Harbor, Port Clinton, Clyde, Lorain, Ottawa Hills, Rossford, Millbury, Walbridge, Holland, Northwood, and Whitehouse. We also serve those who live in Lucas, Wood, Seneca, Lorain, Fulton, Erie, Hancock, and Sandusky Counties. Bookmark and Share
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