Structured settlements don’t have a “one size fits all.” This is especially true when the structured settlement involves minors. Structured settlements allow minors and their parents or guardians to handle their settlement funds in a way that maintains a steady stream of money throughout the minor’s life.
There are two main options for settling funds when a minor is involved.
One option is a single lump sum cash payment. With the single lump sum payout, the injured party gets instant gratification from the settlement all at once. Typically, because a minor is involved, the payment is usually then put into a protected account, and then once the minor reaches the age of 18, they get full control of their money. Unfortunately in this scenario, funds end up being spent within a couple of years. Larry Cohen, a Ringler Consultant said in a conversation with his colleague Ryan Christen Oliphant, “[We] all know what happens to 18-year-olds with a lot of money. That’s not a very good recipe for success.”
The second option for receiving settlement funds is to utilize a structured settlement annuity where a highly-rated life insurance company distributes payments periodically on custom-created dates. A huge benefit of creating a structured settlement is that payments can be tax-free. Even better, because the payment dates are custom-created, they can be made to coincide with paying for college tuition, future medical needs, or even retirement planning. This relieves the injured party from money management stress and ensures that the funds aren’t squandered. Simply put, this is a huge benefit to a minor. If a young person makes a financial mistake, it’ll only affect a portion of the payments rather than the full amount since the full amount won’t have been paid out yet. Additionally, a structured settlement can protect the money from others having access to it as well. Oliphant said, “Parents should understand that a structured settlement is not an emergency fund for them. It is put into place to protect the recipient and the settlement money. A structured settlement ensures that the funds are available at key points in the future as previously decided upon during the settlement process.”
Finally, it is possible to combine these two options. Each case is individual and unique. If there is an immediate need for money — this may include things like current medical costs, educational costs, or other special needs services — your settlement consultant may recommend that you receive a portion of your settlement as a lump sum so that you have money at-the-ready right now, but then also preserve a portion of the settlement in a structured settlement annuity to allow for access to the rest of the settlement proceeds in the future. The main goal is to protect the minor from spending down their settlement funds too early.
When cases involve minors, a structured settlement is usually recommended. Structured settlements can reduce financial insecurities and protect the recipient’s financial future. While there are sometimes instances where it’s better to have a combination of lump sum cash and a structured settlement annuity, the key concept is to protect a minor’s financial future.
Ringler consultants are here to help with your settlement case. You can easily search for a consultant near you here! Our consultants know that each claimant has a unique situation and we take the time to figure out the right settlement options for you. We do this by asking a lot of questions and considering all variables that can affect the distribution and allocation of each individual’s needs, including minors.
Learn more on our website here.
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