What Should Be Known About Structured Settlements for Minors?
While the vast majority of minor and adult structured settlements are set up in the same manner, there is one cardinal difference. Minors have very little, if any, say on how their structured settlement is set up or how it is spent, until they are eighteen.Once the minor turns 18, they will be able to take over control of their structured settlement. Until they turn 18, the minor’s parents or guardian remain in control of the structured settlement and must spend the money according to the specifications ordered by the judge.
The Judge Stipulates How the Money Will Be Spent
A judge will oversee how the structured settlement is spent, so the parents or guardian are held to specific guidelines that prevent them from spending the money irresponsibly or for purchases that do not benefit the child.
The main goal of a structured settlement is to ensure the minor has money for their future. If a lump sum were paid out while the individual was a minor, the funds could potentially be spent before the child turns 18 and is able to make their own financial decisions.
What Can a Structured Settlement Do for a Minor?
When a minor is awarded a structured settlement, this money can be used to secure their future and ensure their financial needs will be taken care of for a long period of time. A structured settlement plan can be designed to help a minor with the following expenses as they grow older.

College tuition payments

To purchase a car

To Purchase a home

Cost of living adjustments
Structured Settlement Laws: Periodic Payment Settlement Act
Over the years, laws have been put into place to protect the rights and best interests of structured settlement recipients. The Periodic Payment Settlement Act was put into law in 1982 as a means of protecting individuals and encouraging them to accept structured settlements for their financial security.
What Is the Periodic Payment Settlement Act?
The Periodic Payment Settlement Act was signed into law by President Reagan in 1982. While there are a few different benefits to this act being made law, one of the biggest is it allows individuals to receive their structured payments tax-free. The structured payments do not have to be included in the gross income report for income tax preparation.
It is important structured settlement recipients understand there is a stipulation in this act that could prevent the tax-free status from applying to an individual. The act states individuals cannot defer, accelerate, or decrease their structured payments or the tax-free status becomes null and void.
Additional Laws Were Put Into Place
In the nineties, advertisements began rising up that offered structured settlement recipients the option of receiving a lump sum instead of monthly payments. When unscrupulous factoring companies began taking advantage of individuals, a new act was signed into law to stop this illegal activity.
The Structured Settlement Protection Act was passed in 2002. The main reason the law was put into place was to protect 9/11 victims and prevent them from being taken advantage of with their settlements.
This law offered several protections that were put into place for structured settlement recipients, including the following.
- The individual is required to receive counseling about the benefits and drawbacks, so they can make a sound decision.
- The individual is granted the right to cancel the process within a specific time frame.
- The individual must be given full disclosure on any charges and fees that result from the sale.
- The sale of any structured settlement must first be approved in court.
- If the sale is not approved by the court, a 40% tax excise is charged for the transfer.
These Laws Protect Structured Settlement Recipients
While these laws may seem intrusive to the recipient, they were put in place to offer protection. A structured settlement is meant to provide financial security for an individual’s future and these laws were put into place to ensure the awarded money is not squandered or misused.
Those who have received a structured settlement award need to be aware of these two acts and how they offer protection and guidelines for how the awarded money is accessed and used. With knowledge of these acts, structured settlement recipients can be informed and remain proactive in protecting their money.
Structured Settlement Protection Act
When it comes to the sale of structured settlement payments, there are laws that have been put into place to protect individuals. Each state has adopted its own Structured Settlement Protection laws and the Federal Structured Settlement Protection Act was signed into law in 2002. Understanding the laws that govern these transactions will help individuals to protect their rights and ensure the transaction they pursue is a favorable one.
Protection at the State Level
As mentioned above, each state has its own laws that have been put into place to protect structured settlement payment holders from being taken advantage of. Although each state has different laws in place, there are some commonalities across the country.
- When a company agrees to purchase a structured settlement, they are required by law to provide information on the difference in value between the sale price and the value of the payments if the agreement is left intact.
- A judge must approve the transfer of payments and will work to make sure the transaction will be beneficial for the individual.
- A disclosure statement must be provided that clearly summarizes the terms of the transaction the individual has agreed to.
- A cooling-off period is granted to the individual to give them time to cancel if they change their mind.
- The entire transaction must abide by all applicable state and federal laws.
Some states will require individuals to seek out an independent professional advisor to ensure they fully understand the implications of this transaction. Other states may only suggest the individual complete this counseling.
The Federal Structured Settlement Protection Act of 2002
The Federal Structured Settlement Protection Act was signed into law in 2002. This act helped to ensure all state laws and regulations were standardized in their main components.
This act was put into place to further cement the protection of the individual and to ensure the process was fair. The following are the two main areas this act addressed in supporting the laws in each state.
- All transactions must be court-approved and in compliance with all state laws and regulations.
- If a structured settlement transfer does not comply with the laws, a 40% excise tax will be required.
These acts were placed for protecting individuals from unscrupulous buyers who simply want to profit at the expense of desperate individuals.
Individuals need to carefully study the laws and regulations and research their own state’s Structured Settlement Protection Act to ensure they are compliant. These laws can help to protect the individual and ensure the transaction they seek is a fair one that will benefit their financial needs.