The below lesson is the eleventh of 16 lessons that are included in Attorney Charles Boyk’s new book, I’ve Stood In Your Shoes, explaining his personal experience with child accidents. You can find the previous lessons in the blog section of our website.
Once the settlement figure is agreed upon, the next thing you must do is ask yourself, “What is the smartest thing to do with this money to make sure it lasts?” An experienced attorney can help you answer that questions based on the specifics of your case.
Ohio law states that if a minor’s settlement is over $10,000, the money must be “impounded.” This means that it must be set aside for the child until they turn 18-years-old. You may think that putting the money into a CD or money market is a good option, but the return on investment can be horrible.
An attorney that is experienced at handling and settling injury cases will understand that one of the best ways to help the client is to structure the settlement. In Josh’s case, my wife and I spoke with a structured settlement broker to see our options and we ended up choosing to put the money there.
A structured settlement pays out a set amount of money to the child over a period of years, often starting when they turn 18, but other ages can be chosen as well. Putting the settlement money into a structured settlement makes good financial sense. The money is automatically placed in investments that are guaranteed to produce money every year once the child turns 18.
Structured settlements help to take the burden off parents who may be unsure of how to manage their child’s settlement. Parents will know as soon as they choose a structured settlement exactly how much the settlement will yield and what their child will receive through periodic payments. Parents that try to manage the settlement on their own do not have a guaranteed fixed return. Also, any investment income yielded from the settlement would be taxable if it is not structured.
A structured settlement also lets parents set up plans that prevent against unwise expenditures that some 18-year-olds might make. The structured plan spreads the payments out over time, preserving the settlement over a period of years.
Some injuries that affect children will require medical expense throughout their lifetime. If there is enough insurance coverage to pay for those expenses, a structured plan is especially beneficial. Payments made in monthly increments would hopefully be able to pay for a lifetime of treatment and living expenses.
If your child is involved in a serious accident that results in injury, be sure to speak to your attorney about a structured settlement. You have to make decisions about a structured settlement before you accept the money, making it critical to receive an attorney’s guidance. This decision must be made first because the insurance company itself has to purchase the structure in accordance with federal tax law. You cannot decide later that you want to invest into a structure.
With Josh’s settlement, we contacted a reputable structured settlement broker and discussed the situation and our goals. The broker was extremely helpful. We ended up putting half of the money with one structure company and half of the money with another structure company. With the two companies investing the money differently, we thought we had done what was best to make sure Josh would be taken care of for a lifetime. It is critical to have an attorney help you deal with these issues and help you make sure that the money will last.
Lesson to be learned: Your attorney can advise you on the ways that you can protect the settlement money and make sure it lasts – especially when a child is involved.
As an attorney and a parent who has gone through the settlement process, I highly advise that a non-attorney does NOT attempt to go through this process on their own. These processes require a significant degree of legal sophistication and experience. One simple mistake in the settlement process can cost a child hundreds of thousands of dollars. An attorney will help you to avoid potential landmines and pitfalls after any serious accident.