Minor's Claims and Funds

SETTLEMENT OF MINOR’S CLAIMS

Whenever a minor is receiving a settlement from a personal injury to the minor, regardless of the amount of the award, the Application to Settle a Minor’s Claim must be filed with the Probate Court in the county where the minor is a resident.  

If the net claim settlement (after payment of expenses and attorney fees) is more than $25,000, then a guardian of the estate must be appointed to support the settlement application.  If the net claim settlement is between $25,000 and $10,000, an Application to Dispense with Guardianship must also be filed. 

If expedient, the Application to Settle and the Application to Dispense with Guardianship may be filed and heard contemporaneously. 

The approval of the Probate Court is required for the settlement of any claims for personal injuries to a minor.  Any settlement for a minor attempted without prior court approval is a nullity.  While parents may file suit on behalf of the minor, and may negotiate proposed settlements, the actual settlement, the authority to execute releases, and the authority to receive proceeds for the incompetent or the minor require appproval from the Probate Court.

  The Court may appoint a guardian ad litem to advocate for minor’s best interest. This most oftern occurs when the parents of the minor are not represented by counsel, or clearly present a situation in which they have an interest in conflict with that of the minor. The payment of the compensation and fees of the appointed guardian ad litem will be determined by the Court and paid from the settlement proceeds, the minor's parents, the guardianship, or as otherwise ordered.

Items necessary to file a Minor’s Settlement of Claim

  1. Minor must be a resident in the county where the application is filed;
  2. Narrative Statement;
  3. Certified Copy of the minor’s birth certificate;
  4. Copy of Driver’s License or Government issued picture ID of the applicant;
  5. The base court cost deposit of seventy dollars ($70.00); and
  6. Complete the Probate Forms listed to the right.
  7. Note: If the net funds are placed into a restricted access account controlled by the Court until the minor attains age 18, the base costs deposit will be increased by $5.00 for every year the child has remainiang until age 18, minus one year.  This is to cover the costs for the filng of the annual verfication of the fund balance and continued access restrictions 

FUNDS OTHER THAN CLAIM PROCEEDS THAT MIGHT PASS TO A MINOR  

What are Other Sources of Funds That Might Pass to a Minor?  
An individual under 18 years of age is a minor.  It is not uncommon for a minor to be entitled to receive funds by inheritance through an estate, as a result of the minor being a beneficiary on a life insurance policy, annuity or financial account after the owner has died. 

What Happens With Non-Claim Settlement Funds Passing to A Minor?
If the funds are $25,000 or less then the Court may order them to be paid (1) to a guardian of the estate of the minor, (2) into a custodial account with a financial institution authorized to receive trust funds for deposit into the name of the minor to be paid to the minor upon attaining age 18, (3) to a parent having custody of the minor, or (4) in a rare instance, to the minor.    
If the total sum exceeds $25,000, it must be managed by a guardian either (1) with adequate surety bond, or (2) within a restricted access custodial account (in lieu of bond, but accessible to the guardian ONLY with a specific approval of the Court).

Are Wrongful Death Claim Proceeds Treated Differently?
If the funds result from the settlement verdict on the wrongful death claim of another person, and the beneficiary is under age 25, the proceeds will either (1) be used to purchase a structured annuity providing for periodic payments to, or for the benefit of the beneificary for life or a defined period of time, or (2) paid into a wrongful death trust established by the Court for the beneifit of the beneficiary.  The trustee selected by the Court must be approved by a guardian of the minor beneficiary or by beneficiary if at least 18 years of age.  The wrongful death trust will remain in existence until the beneficiary attains age 25 years.  The trustee’s authority and limitations for expenditure of trust assets during the trust's existence will be established in the trust document and the trustee will account to the Court.  See the website Tabs "Estates, Wrongful Death Cases" and "Trusts, Wrongul Death Trust" for more detailed discussions.

Why is the Court Involved With Funds Derived from the Settlement of a Minor’s Claim?
Parents and guardians of minors do not have the inherent authority to settle claims of minors.  Approval must be obtained from the probate court for the authority to settle a minor’s claim, execute releases that bind the minor and receipt for the settlement proceeds.  The Court’s involvement is to assure that the best interests of the minor are protected, the settlement is preserved for the intended beneficiary, and is not compromised by the personal interests of the parent or guardian.

Are Minor’s Funds that are Deposited Into a Custodial Available for the Minor before Age 18?
With prior Court approval, the custodial funds may be accessed for the benefit of the minor before attaining age 18, but only under limited circumstances.

 

FREQUENTLY ASKED QUESTIONS REGARDING RESTRICTED ACCESS CUSTODIAL ACCOUNTS

 

What are Custodial Accounts? Custodial accounts are permitted under RC 2109.13 as alternatives to surety bonds whereby the court appointed fiduciary places personal property (cash, securities, or valued tangible personal property, e.g. coins, art work, collections) on deposit with a bank, trust company, or brokerage house for safekeeping, in lieu of purchasing a surety bond equal to twice the value of the deposited asset.  By accepting the custodial deposit, the bank or trust company agrees and represents to the Court that it will not permit the fiduciary to have access to, or withdraw, the deposited assets without a specific court order. Custodial accounts are also permitted under RC 2111.05 and 2111.18 to be made with depositaries authorized to receive fiduciary funds when a settlement of a minor’s claim is being made without a guardianship, without a court appointed fiduciary, or where the net assets being received for the minor’s benefit do not exceed $25,000.  

Is an Account Created Under the Ohio Uniform Transfers to Minors Act a Custodial Account? An account created pursuant to RC 5814.01 to 5814.09 (the Ohio Uniform Transfer to Minors Act/”UTMA”) is not a custodial account of the type referred to in these proceedings.  Even though the person holding the minor's funds under a UTMA account is referred to as a custodian, that statute gives a UTMA custodian, as well as the minor, certain rights to control and access the funds that are inconsistent with the custodial accounts created under RC 2109.13 which are used in lieu of bond.  Therefore, an account titled a “Jane Doe, Custodian for Billie Doe, UTMA” is not a proper restricted access custodial depositary account for these purposes and does not comply with the court’s order allowing a custodial deposit.

What Proof is provided to the Court that the Assets Have Been deposited to the proper Custodial Account? The person ordered to make the custodial deposit has the duty of assuring the Court that the bank, trust company, or brokerage house (the “custodial depository”) file with the Court the written verification that the custodial deposit will be held in accordance with the Court’s order authorizing the deposit.  If a guardianship has been dispensed with because the funds being deposited are $25,000 or less, then the Standard Probate Form 22.3 (verifying the deposit of funds for minors until age 18) will be used.  If the funds being deposited are part of funds held in a guardianship and are deposited in lieu of the guardian filing a bond to cover the deposits, then Local Form 22.3A (verifying the initial receipt and deposit for indefinite period) must be completed and signed by an authorized representative of the custodial depository.  The required forms must be used to verify the deposits are held in accordance with the applicable Court Order and a simple letter from the custodial depository will not substitute for the completed verification form.

Is the Fiduciary still Responsible for the Deposited Asset?   If the funds deposited are part of a guardianship, conservatorship or estate, the fiduciary remains responsible and accountable to the Court for the deposited asset, its management, investment and re-investment, if appropriate.  Access to the asset to perform those functions will also be established by a Court Order. The fiduciary remains responsible for assuring that annually, after the date of the initial deposit of the custodial assets, the custodial depository files with the Court an annual verification (Local Form 22.3B) that reaffirms the assets remain in its custody subject to the access limitations and if the assets are cash then the report must reflect the then current market value of the assets.

If the guardianship is dispensed with and the funds ordered deposited pursuant to Court Order, there is no further accounting for the assets by the applicant as no one but the minor upon attaining age 18 can access the funds, unless the Court authorizes access for a specific purpose.  The financial institution will make annual reportsverifying the continued account existence and its balance.

What If the Deposit is Incorrectly Made? The fiduciary or person charged with making the deposit is responsible for assuring that the deposit is correctly made.  The Court monitors custodial accounts closely.  If the documentation submitted does not reflect compliance with the Court’s Order, the Court may allow a very short time for the depositor, the parent, or the fiduciary to obtain compliance, may require bond, or may impose other sanctions against the responsible fiduciary, parent or depositor.  

This Procedure Appears Restrictive and Cumbersome? The process can be seamless, if the fiduciary has an attorney guiding them and if they are using a custodial depository whose staff is accustomed to these types of accounts.  It can be problematic if attention is not given to the details.  If a need for frequent access to the assets is expected to arise, then bonding may be a more appropriate alternative since access requires a court order.

Can a Custodial Account be Terminated? A restricted access custodial deposit can be terminated with a Court Order. When determining whether to permit lift the restrictive access, the Court will establish the amount of the surety bond that must be deposited before the termination will be approved.

Why is Posting a Bond Not More Attractive? Surety bonds are increasingly difficult to obtain because of tightened underwriting standards and a reduction in the number of carriers issuing them.  Additionally, the costs of the premiums for the surety bond can be substantial (the larger the bond, the higher the premium).

Is an Attorney Required When Establishing a Custodial Account? Due to the complexity of the law related to custodial accounts, the unfamiliarity of many of the staff of the potential custodial depositories, and the scrutiny that the Court gives to assuring the proper creation of these accounts, it is recommended that the assistance of an attorney be obtained.  The employees of the Probate Court are prohibited by law from giving legal advice.

 

 

Additional information