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Minor Settlements in Missouri

Greg Mcnown Jan. 3, 2022

By law minors cannot enter into a contract for settlement of personal injury cases. For purposes of entering into contracts in Missouri, a person is considered a minor if he or she has not attained the age of eighteen. Therefore, when settling a case for a minor in Missouri, certain precautions need to be taken to protect the interests of a minor.

If a minor is injured in an accident and a settlement is reached on his or her behalf, attorneys have historically needed to establish a conservatorship if the amount of settlement exceeds $10,000. Generally, even if the settlement is less than $10,000, a court may require the funds to be deposited into an interest bearing restricted deposit account to be held until the minor reaches the age of 18. A conservatorship and restricted deposit accounts have the affect of protecting the rightful property of the minor. Depending upon the size of the settlement, an annuity may also be set up to provide partial payment of the total settlement upon the claimant attaining a certain age. It is not uncommon for a large settlement to be set up as an annuity and controlled by an insurance company that starts making payments when the minor reaches the age of 18 and at certain intervals of age thereafter.

Setting up a conservatorship or a restricted deposit account is costly and time-consuming. Often times, a conservator (usually a parent) must petition the court to be appointed as a Next Friend of the minor and request a judge to approve the petition appointing the parent as a conservator. The conservator may need to post a bond and if the parent is not eligible or able to do so, the Public Administrator often steps in to act as conservator. A conservator requires yearly accounting of the funds placed in a restricted account. As personal injury settlement amounts have increased, so has the burden on lawyers and the court when settling cases involving a minor. The time to file conservatorships, sometimes referred to as a minor settlement or friendly suit, places significant delays on the parties wishing to settle a case.

The Missouri legislature sought to ease some of these restrictions and delays by enacting the Missouri Statutory Thresholds for Settlements Involving Minors Act in 2021 (R.S.Mo. 436.700) As of August 28, 2021, a person having legal custody of a minor may enter into a settlement agreement with any person or entity provided that no conservator or guardian had been appointed at the time of the settlement and that the total amount of the settlement is $35,000 or less. The new threshold will be adjusted every five years beginning January 1, 2027 based on the Consumer Price Index. In addition, the person (usually a parent) entering into a settlement agreement on behalf of a minor need only to execute an Affidavit attesting that 1)the minor will be fully compensated by the settlement; and 2)there is no practical way to obtain additional amounts from the person or entity entering into the settlement with the minor.

While the new law makes the settlement of personal injury cases involving a minor less complicated and less time consuming, it still has restrictions on the distribution of the funds. For instance, the settlement funds must be deposited into a special uniform transfer to minors account for the sole benefit of the minor. The funds in such an account may not be withdrawn, removed, paid out, or transferred to any person, including the minor except upon 1)a court order; 2)upon the minor reaching the age of 18; 3)at the direction of a duly appointed conservator; 4)at the direction of the custodian for the uniform transfer to minors account for the sole benefit of the minor; or 5)upon the minor’s death.

This new law should help getting personal injury claims settled sooner and without the need of court approval all the while safeguarding moneys rightly owed to the minor. It also protects a person acting in good faith while entering into a settlement agreement on behalf of a minor as well as the person or entity against whom the minor has a claim.

It is highly recommended that one consult with a lawyer knowledgeable in this area before entering into any settlement involving a minor.