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Why courts get involved

When a minor receives settlement money (for personal injury, wrongful death, or other claims), the court steps in to protect the child’s financial interests. The court makes sure the settlement is fair, that attorney fees and costs are reasonable, and that any early distributions serve the child’s needs. Without court approval, a parent or custodian risks being required to repay funds or could face other legal consequences.

Typical options to handle a minor’s settlement in New Jersey

• Blocked (court-supervised) account: The court approves putting settlement proceeds into a blocked or escrow account. Withdrawals usually require a court order. This is common when the full amount should be preserved but limited funds are needed for current expenses.
• Structured settlement: The settlement purchaser (insurance company) buys an annuity that pays the child at set times (e.g., monthly, at age 18, 21, 25). This preserves money long-term and can provide scheduled payments for education or other needs.
• Custodial account (UGMA/UTMA or state equivalent): Some states allow custodial transfers where a custodian manages funds for a minor until a statutory age. If your settlement is rolled into a custodial account, the custodian must use funds only for the child’s benefit. Note: custodial accounts may give the child full control at the statutory age, which can be older or younger depending on the state rules applied to the settlement.
• Special needs trust: If the child has a disability, a properly drafted special needs trust can preserve eligibility for public benefits while allowing funds to pay for supplemental needs (medical equipment, therapies, education). Courts often permit settlement funds to be placed in such a trust.
• Conservatorship or guardianship over property: In some cases the court appoints a guardian or conservator of the minor’s property who manages assets and may petition for expenses on the child’s behalf.

How to get money early for college or medical expenses

Below is a typical path in New Jersey if you need part of a settlement early:

1. Hire an attorney experienced with minor settlements. A local attorney can file the correct petition, present evidence, and protect the child’s interests.
2. Present a plan to the court. The petition usually explains how much you want released, why the money is needed now (invoice, admission letter, medical bill), and how the remaining funds will be protected.
3. Provide documentation. For education: acceptance letter, tuition invoice, financial aid offers, or a cost breakdown. For medical expenses: itemized bills, doctor’s statements, or proof insurance won’t cover the expense.
4. Court review and hearing. The court will evaluate the reasonableness of the request and may hold a hearing. The judge can approve the requested distribution, approve a different amount, or deny the request.
5. Order and distribution. If approved, the court issues an order directing the bank, insurer, or escrow agent how to disburse the funds (pay school directly, reimburse bills, or release funds to a guardian/custodian under conditions).

Courts favor distributions that directly benefit the child (paying school, paying provider) rather than handing large sums directly to a parent.

Common scenarios and how courts typically respond

• College tuition bills while under 18: Courts commonly permit direct payment of tuition or room and board to the school if you show the need and provide documentation.
• Medical treatment expenses: Courts are often willing to allow payments for necessary medical care, rehabilitation, or therapy supported by medical documentation.
• Large, discretionary requests: Requests that look like general parental support or discretionary spending are less likely to be approved without strong justification.
• Partial distributions: Courts may allow a partial disbursement (for current needs) and keep the remainder in a protected account or structured payout.

Costs, timing, and practical points to expect

• Expect attorney fees and court costs to be deducted or addressed in the petition. Courts review fees for reasonableness.
• The approval process can take weeks to months depending on court schedules and complexity.
• Insurance companies sometimes prefer to fund a court-approved structured settlement or an escrow account to avoid future disputes.
• Tax rules vary depending on the nature of the damages (e.g., physical injury awards are treated differently for federal tax). Consult a tax professional about tax consequences.

When a special arrangement may be appropriate

Consider these when applicable:

• If the child is disabled, a special needs trust can preserve eligibility for Medicaid and SSI while using funds for extras not covered by public benefits.
• If you want steady income for schooling or long-term care, a structured settlement annuity may be best.
• If the child will need control at a later age but you want oversight now, a blocked account with periodic court supervision may work.

Practical checklist to request early access

1. Talk with the attorney who handled the settlement (or hire one experienced with minor compromises).
2. Gather school acceptance letters, invoices, medical bills, and proof insurance denials if applicable.
3. Prepare a proposed order that identifies the exact amount and payee (school, provider, escrow).
4. Be ready to explain how the remaining funds will be preserved for the child’s future.

Resources

For court forms and general guidance about guardianship, conservatorship, and court-supervised matters in New Jersey, use the New Jersey Courts self-help resources: https://www.njcourts.gov. For state legislation and statutory text, visit the New Jersey Legislature site: https://www.njleg.state.nj.us.

Disclaimer

This is general information about New Jersey procedures for handling settlements for minors. It is not legal advice. Rules and procedures vary by county and case specifics. Consult a licensed New Jersey attorney to apply this information to your situation.

Helpful Hints

• Start early. Court approvals and structured settlement arrangements can take time. Don’t wait until tuition is due to begin the process.
• Collect documentation up front—school bills, acceptance letters, medical statements, and proof of other funding sources (FAFSA, insurance).
• Consider asking the court to pay the school or provider directly rather than giving cash to a parent or guardian.
• Ask about a structured settlement annuity if you want predictable, long-term payments that are harder to misuse.
• If the child receives public benefits, seek counsel about a special needs trust before distributing funds.
• Get a cost estimate from your attorney for filing fees and likely attorney fee approval so you know how much will be available net of fees.
• Be prepared to explain how the remaining settlement will be protected for the child’s future needs (education, housing, health care).