Settling Minor Claims In Georgia: From Beginner To Expert In One Short Article
By: Ken Sisco
Settling minor claims in Georgia involves a unique set of rules that must be followed to protect both claimants and defendants. This article will provide an explanation of those rules along with practice notes and the strategy to efficiently get the settlement approved.
Background
In Georgia, generally, the natural guardian or next friend of a minor is not legally qualified to accept personal property, such as money, for a minor unless and until they become the legally qualified conservator for the minor. However, there are certain exceptions when the natural guardian is accepting funds to resolve a minor’s personal injury claim.
The necessity for a conservator to resolve a minor’s personal injury claim is governed by the gross and net settlement amounts.
• If the gross settlement amount is less than $25,000 then neither court approval nor a conservator is required.
• If the gross settlement amount is over $25,000 but the net settlement amount is less than $25,000 then court approval is required but the appointment of a conservator is not required.
• If both the gross and net settlement amounts are greater than $25,000 then both court approval and a conservator are required.
Generally, the minor’s parents are the minor’s natural guardians. However, if the parents are divorced and one parent has sole legal custody, then the other parent is no longer legally considered a natural guardian. If the parents share joint legal custody of the minor then both parents remain natural guardians. Therefore, it is important to confirm the status of the relationship between the minor and the minor’s parents when working on a minor claim.
Gross vs. Net Settlement Amounts
The gross settlement amount is the full amount of the settlement. The net settlement amount is what is left after the gross settlement is reduced by the cost to satisfy:
• Attorneys’ fees;
• Litigation expenses;
• Legally enforceable liens/medical bills;
• If applicable the cost to purchase an annuity/structured settlement; and/or
• The present value of any amount placed into a trust for the benefit of the minor.
No Court Approval
When the gross settlement is less than $25,000 then the minor’s natural guardian or next friend can settle the case without court approval or the appointment of a conservator. However, if the minor has a conservator, then only the conservator can settle the minor’s claim.
PRACTICE NOTE – When settling a case without court approval, payment of the settlement should be conditioned upon receipt of an affidavit from the natural guardian averring that such person is:
1) the natural guardian of the minor;
2) that no conservator has been appointed for minor; and
3) that the value of the minor’s personal property will not exceed $25,000.
Upon the receipt of such an affidavit, payment of the settlement is statutorily protected and is treated as having been paid to the legally qualified conservator of the minor. It also relieves the payor from any duty to see that the funds are properly applied. Essentially, the affidavit protects against a future claim that the purported natural guardian was not authorized to settle the minor’s claim or accept funds for the benefit of the minor.
Court Approval
Generally, if a lawsuit has not been filed then a Petition to Compromise Doubtful Claim of a Minor needs to be filed with the probate court in the county where the minor resides. Otherwise, the Petition is filed in the court where the lawsuit is pending.
PRACTICE NOTE – In counties where the probate court is slow in processing the Petition to Compromise Doubtful Claim of a Minor, some attorneys will file a lawsuit in the applicable State/Superior Court and then file the petition with that court, rather than filing with the probate court. This is done in an attempt to expedite the court approval process.
The court has the discretion to determine whether a hearing is required. The court is authorized to approve the settlement without a hearing if it finds that the record supports that the settlement complies with all legal requirements.
When the gross settlement is greater than $25,000 and the net settlement amount is less than $25,000, it must be approved by the applicable court, and no conservator is required. However, the natural guardian receiving payment shall hold and use the settlement for the benefit of the minor and shall be accountable for misuse. When both the gross settlement and net settlement are greater than $25,000, it must be approved by the applicable court, and a conservator must be appointed.
Conservator
Most minor settlements are a fairly straight forward one time transaction and the requirements of a conservator can be very onerous. If a conservator required, the natural guardian:
1) Will have to file a petition to be appointed as conservator in their local probate court;
2) Will likely have to have a hearing on the petition;
2) Will likely be required to purchase a bond;
3) Will have to file an initial inventory of the minor’s personal property and a plan for managing, expending and distributing the minor’s property for court approval; and
4) Will have to file annual returns updating the inventory and plan for court approval every year thereafter, until the minor turns 18 years old.
PRACTICE NOTE – If the Petition to Compromise Doubtful Claim of a Minor is filed in the probate court, then the Petition to Appoint Conservator typically is addressed at the same hearing. If a lawsuit was filed then the Petition to Appoint Conservator will be filed separately in the probate court and there will be two separate hearings.
Given the onerous requirements of a conservatorship, which include a significant expenditure of time and money, most people would prefer to avoid it if possible. An effective strategy to avoid the requirement that the natural guardian be appointed as a conservator is to reduce the net settlement amount to $25,000 or less through the purchase of an annuity/structured settlement.
Most financial planners and investment gurus will generally advise clients against the purchase of annuities/structured settlements. Most investment advisers believe they can get a better rate of return than is offered by an annuity. However, in the context of a minor settlement, there are other factors that may weigh more heavily into preferring an annuity/structure settlement instead of a lump sum payment.
First, the cost of an annuity reduces the net settlement amount and can be used to reduce the net settlement to $25,000 or less. That in turn removes the requirement that the natural guardian be appointed as a conservator.
Second, an annuity allows the natural guardian to determine when and how much money the minor receives. Unless the minor will be incapacitated after she reaches the age of majority, upon the minor’s 18th birthday, the minor becomes emancipated and will receive the full amount of the remaining settlement.
Depending on the amount of the settlement and the minor’s age and maturity, the natural guardian may be concerned that if the minor receives a significant sum of money at age 18, she will squander the money and make immature purchases. Therefore, the natural guardian may want to defer when the minor receives the proceeds of the settlement and use the annuity as a financial plan.
There are a variety of ways the annuity can be structured based upon the natural guardian’s concerns for the minor. The annuity can simply defer the full amount of the net settlement until the minor is more mature such as to age 21 or older. The annuity can also be paid in monthly or other period payments. For example, the natural guardian could structure the annuity so that the minor receives a small sum when the minor turns 18 to fund the purchase of a reasonably priced reliable used car, then a larger sum at age 21 to help pay off college loans and the remainder at age 25 to use toward a down payment of a starter house. Thus, the natural guardian has the flexibility to use the annuity to structure the net settlement payments in the manner which the guardian believes is in the minor’s best interests.
PRACTICE NOTE – Courts tend to favor the use of annuities/structured settlements as they reduce the risk of the minor’s money being improperly used either intentionally or unintentionally. Courts are more likely to approve settlements where the minor’s assets are secured through an annuity and are less likely to require the purchase of a bond to protect the minor’s assets.
Conclusion
Minor settlements in Georgia are not complicated once you understand the rules. Knowing the rules along with the practical issues that arise during the process enables one to expertly navigate through minor claims.
Attorney Contact Info
Ken Sisco
ken.sisco@swiftcurrie.com
404.888.6238