Can A Child's Structured Settlement Pay For College?
A structured settlement for a minor is a financial arrangement where the settlement funds are paid out in periodic installments rather than a lump sum. These settlements are often used to ensure long-term financial stability for minors who have received compensation due to personal injury, medical malpractice, or wrongful death claims. The funds can be used for various purposes, including education, medical expenses, and other significant life milestones.
Case Scenarios
Traumatic Brain Injury and Spinal Cord Injury: Colin, an 11-year-old, suffered severe injuries from faulty playground equipment. His settlement included a structured settlement annuity to cover lifelong medical care and educational expenses.
Birth Injury: A minor born with severe congenital disabilities due to Thalidomide exposure received a structured settlement to cover ongoing medical and educational needs.
Wrongful Death: A child whose parent died in an accident received a structured settlement to ensure financial support for education and other needs.
Key Factors to Consider
Current Financial and Medical Needs: Assess the immediate needs of the minor and how the structured settlement can address them.
Future Medical and Educational Needs: Plan for long-term expenses, such as college tuition and ongoing medical care.
Government Benefits: Ensure that the structured settlement does not disqualify the minor from receiving needs-based government benefits.
Financial Maturity: Consider the minor's ability to manage funds responsibly when they reach adulthood.
Recommendations
When It Makes Sense:
Long-Term Financial Stability: If the minor has ongoing medical and educational needs, a structured settlement can provide consistent financial support.
Protection from Poor Financial Decisions: Structured settlements can prevent the minor from accessing a large sum of money at a young age, reducing the risk of poor spending decisions and not being able to afford higher education..
When It Doesn't Make Sense:
Immediate Large Expenses: If the minor requires a significant amount of money upfront for immediate medical treatment or other urgent needs, a lump sum might be more appropriate.
Financial Independence: If the minor is close to reaching adulthood and has demonstrated financial responsibility, and does not plan to attend college, a lump sum might be more suitable.
Conclusion
Structured settlements for minors offer a secure way to manage settlement funds, ensuring long-term financial stability and protection from poor financial decisions. However, it's essential to carefully consider the minor's current and future needs, as well as their ability to manage funds responsibly. By tailoring the structured settlement to the minor's specific circumstances, families can provide a solid financial foundation for their child's future.