After a Child Wins a Personal Injury Settlement, Which Divorced Parent Receives the Award?

If a child is awarded damages after a personal injury lawsuit, it is usually the parents who receive the settlement because a child cannot enter into a legally-binding agreement. However, if the child’s parents are divorced the issue of which parent accepts the award can quickly become a point of contention.

Although there are differences in each state’s child welfare laws, and how the courts have interpreted those laws, the parent who was awarded custody will be the parent who receives any money that is due that child. If joint custody was awarded by the court, the parent who was awarded primary physical custody will usually receive any funds that are owed to a child. In either case, the parent who receives money that is due the child does so on behalf of that child. Regardless, the court that awarded custody has not given up its own responsibility for assuring that the best interests of the child are being protected at all times.

When a child is the recipient of a substantial personal injury settlement, is most cases the settlement will be made in two parts. The first part is usually a cash award that is intended to cover:

  • The child’s past medical expenses
  • Any medical expenses for the child that may be reasonably expected to arise in the near future
  • Attorney’s and other legal expenses related to the child’s personal injury case
  • Reimbursement of any out-of-pocket expenses for the child paid by either parent or a guardian

The second part of a settlement is awarded to provide for any future medical expenses that are a direct consequence of the accident, physical and/or psychological rehabilitation, or education and vocational expenses. This part of a settlement is usually placed in a trust fund that is accessible only with the court’s permission or in the form of an annuity that provides a steady flow of income for a set period of time. Both a trust or an annuity will usually become the child’s personal property when the child reaches the age of 18 unless the child is incapable of managing his or her affairs.

Court Approval

In some states, a settlement award won by a personal injury lawyer Milwaukee WI relies on for a child’s injury is subject to approval by the court that made the decision regarding child custody at the time the parents’ divorce was finalized. In others, state law requires that settlements above a certain dollar amount be placed in savings account or a trust fund that will become available to the child when he or she reaches the age of 18. Regardless of state law, when a parent accepts a settlement on behalf of a child, that acceptance creates a fiduciary duty on the parent that is due the child.

Fiduciary Duty

As a fiduciary, the custodial parent must act in a manner that protects the child’s financial well-being. To preserve the money awarded for child’s injuries should the child have future medical or medically-related expenses, the court will usually require that the custodial parent obtain the court’s permission to remove more than a certain amount of money within a specific time period. This is not a case of the court interfering with family life but rather a safeguard against a parent mismanaging what could be the child’s only financial resource in the future.

In summary, the parent who was awarded custody of a child is usually the parent who will receive any settlement of a personal injury case involving the child. The family or domestic relations court that awarded custody is free to exercise its discretion when it comes to insuring the child’s best interests are met.

If you have questions or concerns about parental rights or obligations when it comes to personal injury lawsuits, it may benefit you to seek legal counsel.

Thanks to our friends and contributors from Hickey & Turim S.C. for their insight into personal injury settlements involved in child custody and divorce proceedings.

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