Disclaimer: This is educational information only and not legal advice. For guidance about your specific situation, consult a Vermont attorney who handles minor settlements, guardianships, or trusts.
Detailed answer — how Vermont law treats a minor’s settlement and early access for college or medical costs
When a minor in Vermont receives settlement money (for example, from a personal-injury claim, insurance settlement, or other legal recovery), those funds cannot simply be spent by a parent or guardian without following the legal procedures that protect the minor’s financial interest. Several legal tools and court procedures determine whether some or all of the funds can be used before the child reaches majority.
Common legal mechanisms that control a minor’s settlement
- Approved court settlement or blocked account: Often a settlement for a minor must be approved by the probate or family court. The court can order that funds be placed in a blocked account or otherwise restricted. The court will usually approve withdrawals only for the minor’s support, maintenance, education, or health care, or as the court otherwise directs.
- Custodial account (Uniform Transfers to Minors Act / UTMA): If a settlement is given to a custodian under UTMA, the custodian manages the property for the minor until the statutory termination age. Custodial accounts are typically intended to preserve assets for the child’s benefit, not to give the custodian unlimited authority to spend the money on the child’s behalf without documentation.
- Conservatorship/guardian of the property: If the court appoints a guardian or conservator to manage the minor’s property, that fiduciary can make expenditures for the minor’s necessities, education, and medical care but must follow the court’s rules and accounting requirements.
- Spendthrift or special trust: Parties sometimes create a trust (for education, a special needs trust, or other purpose) that defines when and how trustees can distribute funds for college, medical expenses, or other needs. Courts often view trusts favorably because they give clear instructions.
- Structured settlements: A structured settlement spreads payments over time and can include provisions allowing earlier payments for medical care, education, or other specified needs.
Can you get money out before the child turns 18?
Short answer: Possibly — but only through the proper legal pathway. Vermont courts can allow early access to settlement funds for the child’s reasonable needs (healthcare, education, necessary support). The likely paths are:
- Ask the probate or family court that approved the settlement to authorize an early distribution. The court will consider whether the requested expenditure is in the child’s best interest and whether any alternative source of funds exists.
- If the funds are in a custodial account (UTMA), follow the terms of the custodial statute and account custodian duties. Some custodians can pay for education and medical expenses directly, but the custodian must act in the child’s best interest and keep records.
- If a guardian/conservator or trustee manages the funds, petition the court for authority to pay specific expenses. The court may require invoices, proof of need, and an accounting plan for remaining funds.
- If you anticipate college or major medical costs before the minor reaches majority, consider negotiating the settlement to include structured payments or a trust that allows distributions for education/medical care before age 18.
What the court will typically look for
When deciding whether to allow early access, the court will typically evaluate:
- Whether the proposed use (tuition, housing, medical bills) is reasonable and directly benefits the minor;
- Whether the distribution will leave the minor with sufficient funds for future needs;
- Whether the person asking for funds is acting in the child’s best interest and can account for the money;
- Whether less-restrictive alternatives exist (e.g., scholarships, insurance, payment plans); and
- Any specific terms in the settlement, guardian order, custodial agreement, or trust documents.
Where Vermont law fits in
Vermont’s probate and guardianship rules govern court approval of minor settlements, the appointment of guardians or conservators, and property management for minors. For general statutory and court guidance, see the Vermont Legislature and Vermont Judiciary pages:
- Vermont Statutes — Vermont Legislature (search for provisions on guardians, conservators, and transfers to minors)
- Vermont Judiciary — Probate and guardianship information
Practical example (hypothetical)
Suppose a 15-year-old in Vermont settles a personal-injury claim and receives $100,000. The settlement is approved by the court and placed in a blocked account that requires court permission for withdrawals. The parents discover the child will need $20,000 for a necessary surgery and ongoing therapy. The parents petition the probate court, providing medical invoices and a treatment plan. The court reviews the request and, finding the proposed expenditures reasonable and in the minor’s best interest, approves a release of $25,000 to cover medical bills and related expenses, leaving the remainder protected for future needs.
Helpful hints — steps you can take right now
- Locate the settlement documents and any court order approving the settlement. Those documents often spell out how funds are to be handled and whether court approval is required for distributions.
- Check the account type: Is the money in a court-ordered blocked account, a UTMA custodial account, a trust, or with a trustee? Each has different rules for withdrawals.
- Gather supporting documentation: tuition bills, enrollment letters, medical invoices, treatment plans, and any insurance denial or coverage statements. Courts want concrete evidence of need.
- Talk with the claimant’s attorney or the attorney who handled the settlement. They often know the quickest route to petitioning the court or negotiating settlement language allowing payment for education or medical care.
- Consider alternative funding sources simultaneously: Medicaid, state programs, school financial aid, scholarships, payment plans, or charity care to reduce the requested court distribution and make approval more likely.
- If a long-term plan is needed, ask about creating a trust or structuring settlement payments to allow future qualified withdrawals for education or health care before the child turns 18.
- Keep accurate records and be prepared to file required accountings with the court. Courts often require periodic reports from guardians, custodians, or trustees.
- Consult a Vermont attorney experienced with minor settlements, guardianship, or trusts to prepare petitions and present the request efficiently to the court.
How an attorney can help
An attorney can review settlement and court documents, prepare the petition for distribution, assemble supporting evidence, and represent you at the hearing. They can also advise whether a trust, structured settlement, or conservatorship would better meet the long-term needs of the minor.
Final note: Courts prioritize protecting the minor’s interest. Early access is possible, but only through the proper legal channels and with clear proof that the distribution serves the minor’s best interest.