California Medical Malpractice Law Blog

A settlement involving a birth injured child must be approved by a judge. The process is known as a minor's compromise. The purpose of a minor's compromise is to assure the court that the settlement proceeds will not be mismanaged to the detriment of the child. A common method of preserving a minor's assets is to allocate a significant portion of the settlement to the purchase of an annuity (See: July 29, 2008 Blog Entry) and to direct the monthly annuity payments into a special needs trust. A special needs trust holds the proceeds for the exclusive benefit of the injured child. Trustees direct the distributions from the special needs trust to address the needs of the child. A judge may require that a professional trustee be appointed in addition to the parents or close family members. The professional trustee often is affiliated with a bank and will charge an administrative fee. The special needs trust has several benefits, the most notable of which is that under most circumstances it allows the beneficiary to remain eligible for public benefits. The special needs trust plays an important roll in obtaining a judge's approval of a minor's compromise. Your birth injury attorney will work with a special needs trust attorney to create a trust that works for your individual situation.

Annuities play a key role in funding the future care needs of children with birth injuries. An annuity refers to a stream of fixed payments over a specified period of time. Most jurisidictions require that funds paid to resolve a birth injury case be used in large part to purchase an annuity. There are many reasons for that, the most fundamental, is that the court can be assured that the settlement proceeds will not be mismanaged.

Annuities are purchased from large insurance companies. The purchaser gives the insurance company payment of a lump sum of money in exchange for a contractual promise to pay out a stream of money. Annuities are very flexible and can be structured in the best interests of the child. For instance, an annuity can pay a certain amount per month, with annual cost of living increases, for the life of the annuatant or for a guaranteed period of time. The cost of the annuity will vary depending upon the guarantees and annual increases. Typcially your attorney and annuity broker will help you determine what type of annuity is right for your child.