What are Structured Settlements?

Structured settlements can be used in personal injury cases where the victim is not able to handle their financial affairs. Common examples include minors and adults with cognitive disabilities. Instead of paying the victim a single lump sum, the settlement funds are placed into an annuity by the insurance company – and then the annuity pays the injured plaintiff a series of payments over time instead. A structured settlement allows for the payment of medical bills as they become due and pays additional amounts on a regular basis.

When a child in Georgia turns 18, they may receive the balance of the settlement funds in a lump sum check – though the annuity can be created so that there is a payout of some amount at age 18 and the remaining balance is paid out over the minor’s (now adult’s) lifetime. This arrangement might provide payouts when the child graduates college, for instance.

For victims who have special needs, the best option might be a special needs trust, which allows a trustee to manage the funds for the victim’s benefit. Georgia has specific laws for the creation and administration of structured settlements.

Georgia’s requirement for structured settlements for minors

Minors, like adults, are entitled to compensation from defendants who cause accidents for their medical bills, pain and suffering, and all other financial and personal damages. In 2022, Georgia updated its laws on when and how a structured settlement is necessary for plaintiffs who are minors.

In most cases, the parents or medical providers will recover a portion of the settlement to cover medical bills. Payment arrangements for the pain and suffering damages will depend on the amount and timing of the settlement. Generally, when a minor suffers injuries, the personal injury lawsuit is brought in the names of the parents and the child. Georgia law provides the following requirements for the settlement of a minor’s injuries:

• Settlements for less than $25,000. If there is no lawsuit and the “gross settlement” amount (the total settlement before any legal fees and expenses) is $25,000 or less, the parents can settle the claim without court approval or without the approval of a conservator. A conservator is someone appointed in a court proceeding to manage the financial and personal affairs of a minor (or someone who is incapacitated). Essentially, the insurance company will write a check payable to the parent of the minor. These funds are given to the parents for their child after the lawyer’s fee and any other expenses are paid.
• Settlements for more than $25,000 – where the “net settlement” (the settlement amount after the lawyer’s fee and expenses) is less than $25,000. A gross settlement of more than $25,000 requires court approval by a judge. The judge may reject the settlement if they believe the settlement is not in the best interests of the minor. If a lawsuit was filed, the judge assigned to the personal injury case must approve the settlement. In cases that did not become lawsuits, a probate judge must approve the settlement. These claims do not require a conservator, and parents or guardians must use the funds for the minor’s benefit.
• If the gross and net exceed $25,000. In cases where the gross and net exceed $25,000, a conservator must serve to protect the minor’s interests. The court must also approve these settlements after evaluating whether they are in the child’s best interests.

Once the settlements are approved and agreed to, they become binding and final, including for the minor.

Who are the structured settlement participants

The parties to a structured settlement annuity or trust include:

• The annuitant. The annuitant is the accident victim.
• The owner of the annuity. This is generally the insurance company or a trustee.
• The payee. This is the person who receives the installment payments. It could be the trustee, the annuitant, medical providers, or other people/entities.
• The beneficiary. Generally, the annuity or trust should designate a beneficiary if the annuitant dies before all the funds are paid.

What factors should be considered when deciding whether to use a structured settlement in Atlanta and Savannah for personal injury claims?

Some of the factors to consider include:

• The long-term medical needs of the accident victim;
• If the victim has a permanent physical or cognitive disability – or any special needs;
• Any other sources of income for the victim;
• How much interest the annuity can earn;
• The timing of any payouts;
• The minor’s family situation; and
• The tax advantages of a structured settlement.

If the structured settlement includes a trust, then the trust agreement should specify who the trustee is, what powers the trustee has, what steps an annuitant can take if they believe the trustee is not managing the trust correctly, and who should be an alternate trustee if the trustee dies or is unable to act as trustee. Trustees are usually individuals, but some business entities, such as banks, may also qualify to act as trustees.

The advantages of a structured settlement include:

• The plaintiff will have reliable income for the rest of their life.
• Helping to provide access to governmental benefits.
• Protection from creditors if the annuity/trust is created properly.
• There may be advantages for the defendant, which makes it more likely that they’ll agree to a settlement.

The disadvantages to structured settlements generally are:

• The annuity is locked into a specific rate of return – if it is a fixed annuity as opposed to a variable annuity.
• The insurer’s solvency may be a factor.

Our lawyers will explain if and when you can sell a structured settlement and the advantages and disadvantages of doing so.

At Harris Lowry Manton LLP, our trial lawyers fight to obtain full compensation for every victim’s medical bills, pain and suffering, lost income, and other damages. We can explain when the court must approve a settlement. Our Atlanta and Savannah, Georgia lawyers will discuss the pros and cons of structured settlements and the specific details of a structured settlement. To help ensure that your child has the funds they need until they turn 18 or for their lifetime, please call us or fill out our contact form to schedule a free initial consultation.