Divorce is complicated, and it often forces parents to think about things they never expected—custody schedules, child support, and splitting holidays. But what happens when a child is injured and one or both parents want to pursue a personal injury lawsuit?
If your child is hurt due to someone else’s negligence, they may be entitled to a financial settlement or jury award. This money is meant to cover medical expenses, pain and suffering, and other damages. But when parents are divorced, a new set of questions arises: Who gets the money? Who decides how it’s spent? Can one parent use it without the other’s consent?
The answers depend on factors like custody arrangements, state laws, and how the settlement is structured. Let’s break down how courts typically handle these funds to ensure they benefit the child—not the parents.
Who is entitled to receive a child’s injury settlement?
When a minor child receives a settlement or jury award for their injuries, the money legally belongs to them—not their parents. However, courts can’t simply hand over a large sum of money to a child. If they did, a parent might take control of the funds, or worse, the child could spend it on something impractical—like Pokémon cards and a lifetime supply of mini Snickers!
Since minors cannot manage their own finances, a parent or legal guardian is typically responsible for overseeing the funds. Courts, however, take steps to ensure the money is used strictly for the child’s benefit.
The specific rules governing how these funds are managed depend on custody arrangements and state laws on guardianship of a minor’s finances.
Find out how a divorce impacts your own personal injury settlement.
How custody arrangements impact settlement distribution
If the child’s parents are divorced, the custody agreement plays an important role in determining who has the authority to manage the settlement money. Here’s a look at the most common scenarios:
- Sole custody: If one parent has sole legal custody, they are typically responsible for managing the child’s settlement funds. However, they must still follow state guidelines and may be required to establish a restricted account or obtain court approval for major expenditures. These safeguards help ensure the funds are used in the best interest of the child (more on this in the next section).
- Joint custody: When both parents share legal custody, decisions regarding the settlement funds may require mutual agreement. Some courts may appoint a neutral third party, such as a guardian ad litem, to oversee the management of the funds if there is a dispute.
- Non-custodial parent: A parent without legal custody generally has no direct control over the settlement money, but they may still be entitled to reimbursement for medical expenses or other costs they covered due to the child’s injury.
How is settlement money protected for the child?
Imagine a child suffers a severe traumatic brain injury (TBI) in a car accident caused by a reckless driver. The child’s medical needs are substantial—think years of therapy, specialized equipment, and ongoing care. A car accident attorney filed a lawsuit against the at-fault driver, and after a lengthy legal battle, the child is awarded a $2 million settlement.
Without legal protections in place, there’s a risk that a parent could misuse the money—perhaps spending it on personal items, making poor financial decisions, or even gambling it away. To prevent this, courts typically require that settlement funds for minors be placed in structured financial arrangements designed to safeguard the child’s future.
Common safeguards for a child’s settlement money include:
- Blocked accounts: Many states require that large settlements be deposited into a court-monitored blocked account, which restricts withdrawals without court approval.
- Structured settlements: Instead of receiving a lump sum, the funds may be distributed in periodic payments once the child reaches adulthood. This structure helps ensure long-term financial security.
- Trust funds: In some cases, a trust is established with a trustee—such as a financial institution or court-appointed guardian—responsible for managing the money and ensuring it is used appropriately.
Here’s an example of how these safeguards work in real life:
Emma is six years old. She’s riding in the back of her mother’s car when the vehicle is struck by a drunk driver who ran a red light. Emma suffers a traumatic brain injury, requiring months of hospitalization, followed by years of rehabilitation. The driver’s insurance company initially refuses to pay, prompting Emma’s mother to file a personal injury lawsuit on Emma’s behalf.
After two grueling years of legal proceedings, Emma is awarded a $1.5 million settlement. However, because she is a minor, the court mandates that the money be placed in a blocked account to ensure it’s used solely for her benefit. This means her parents cannot access the funds at will—they must petition the court for approval before withdrawing any money.
A year after the settlement, Emma’s doctors recommend a cutting-edge therapy that could significantly improve her mobility and quality of life, but it costs $50,000 and isn’t covered by insurance. Emma’s mother consults an attorney, who helps her file a petition with the court to request a withdrawal from the blocked account.
During the hearing, the judge reviews the medical documentation, consults financial records to ensure the remaining funds will still meet Emma’s long-term needs, and ultimately grants the request. The court orders that the $50,000 be paid directly to the rehabilitation center rather than Emma’s mother, ensuring the money is used as intended.
Can a parent use the settlement money for their own expenses?
A child’s injury settlement is strictly intended for the child’s benefit. Parents cannot use the funds for personal expenses, even if they’ve incurred financial hardship due to the child’s injury.
Courts may allow reimbursement for out-of-pocket medical expenses or other necessary costs directly related to the injury, but any withdrawals must typically be court-approved.
If one parent believes the other is misusing the child’s settlement funds, they can file a legal petition to request court oversight or a change in financial management. In cases of proven financial misconduct, courts may appoint a guardian or trustee to take control of the funds.
Consider the following hypothetical:
Let’s say 10-year-old Jake is seriously injured in a bicycle accident caused by a defective product. His parents file a lawsuit against the manufacturer, and after a settlement is reached, Jake is awarded $500,000. Because he is a minor, the court places the funds in a blocked account, requiring court approval for any withdrawals.
A year later, Jake’s father, Mark, falls behind on rent and other bills. Believing he’s entitled to the money because he has spent so much time and money caring for Jake, Mark files a petition to withdraw $20,000 from the settlement account, claiming it’s necessary for “household stability.” The court, however, denies the request, ruling that the funds are only for Jake’s direct benefit—not to cover general living expenses.
Nevertheless, Mark finds a way around the restrictions by using a portion of a court-approved withdrawal (originally meant for Jake’s ongoing physical therapy) to cover personal expenses instead. When Jake’s mother, Lisa, learns about this, she files a motion with the court, alleging that Mark is misusing the settlement funds.
After reviewing financial records and hearing arguments from both parents, the judge agrees that Mark improperly spent the money. The court removes him as the fund’s guardian and appoints a third-party trustee to manage Jake’s settlement account moving forward, ensuring all future withdrawals are used solely for Jake’s needs.
When a minor child receives an injury settlement, divorced parents will need to navigate some legal hurdles. If things get too complicated or if a dispute arises, consider reaching out to an experienced attorney.
How Florida handles child injury funds in divorce
In Florida, when a minor child is injured and receives a settlement, the funds are legally the property of the child—not the parents. This holds true regardless of whether the parents are married, divorced, or separated. The process for handling such settlements is governed by Florida Statutes §§ 744.301, 744.387, and 744.3025, which establish specific procedures based on the settlement amount to ensure the child’s interests are protected.
Settlements of $15,000 or less
- Pre-lawsuit settlements: If no lawsuit has been filed and the gross settlement is $15,000 or less, the minor’s natural guardians (typically the parents) can settle the claim without court approval or the need to establish a guardianship.
- Post-lawsuit settlements: If a lawsuit has been filed, court approval is required for any settlement, regardless of the amount.
Settlements exceeding $15,000
Any settlement where the net amount (after deducting attorney’s fees and costs) exceeds $15,000 requires court approval. In such cases, the court will require the appointment of a guardian of the property to manage the settlement funds for the minor. This guardian can be one of the parents or another suitable individual appointed by the court.
Settlements of $50,000 or more
For settlements where the gross amount is $50,000 or more, the court must appoint a guardian ad litem to represent the minor’s interests, unless the court finds that the guardian has no potential adverse interest to the minor.
When parents are divorced, the court’s primary concern is the best interest of the child. The court will determine who is best suited to serve as the guardian of the property, which may be one of the parents or another individual. The appointed guardian will have fiduciary duties to manage the settlement funds solely for the benefit of the child. Importantly, the funds cannot be used by the parents for their own benefit or to fulfill their legal obligations to support the child.
Once a guardian of the property is appointed, the settlement funds are typically placed into a restricted depository account or structured settlement. These funds cannot be accessed without a court order, ensuring they are preserved for the child’s benefit until they reach the age of majority (18 years old). Any disbursements from the account must be approved by the court and used exclusively for expenses that benefit the child.
Can Minors File Personal Injury Lawsuits?
In order to file a lawsuit in the United States, a person must have something called “legal capacity.”