Compromise of a Minor’s Claim – How It Works in California

A compromise of a minor’s claim is when an adult executes a settlement agreement on behalf of a minor child. This is necessary because children under the age of 18 are not legally able to enter contracts in California.

Here are five key things to know:

1. Personal injury settlement agreements are contracts and must meet contract requirements under California law.
2. The minor’s compromise process is intended to protect the rights of the minor and ensure that their interests are protected.
3. The court may appoint a guardian ad litem to protect the interests of the child.
4. The minor and the guardian ad litem usually must appear at a compromise hearing for a judge to approve the minor’s compromise.
5. The settlement money is typically held in a trust until the minor reaches age 18.

Below, our California personal injury attorneys address frequently asked questions about a minor’s compromise and how it may affect your case:

• 1. What is a compromise of a minor’s claim in California?
• 2. Who can participate in the compromise of a claim on a minor’s behalf?
• 3. What is the legal procedure for compromising a minor’s claim?
  • 3.1 What are the two types of claims?
  • 3.2 Where must the claim be filed?
• 4. What information must be included in the petition for a compromise of a minor’s claim?
• 5. Is there a hearing which has to be held?
• 6. How are the proceeds from the settlement handled?
  • 6.1 What is a blocked account?
  • 6.2 What is a special needs trust?
  • 6.3 Can the proceeds be distributed to the child’s caretaker?
  • 6.4 What is a minor’s settlement trust?

1. What is a compromise of a minor’s claim in California?

A compromise of a minor claim is a legal phrase that refers to a settlement of a disputed claim for money damages in a personal injury case for the benefit of the minor under the age of 18.

Examples of disputed claims in negligence-based personal injury lawsuits include:

• Medical bills from a California car accident;
• Compensatory damages resulting from an injury that occurred at a California public school;
• Pain & suffering and rehabilitation costs resulting from a slip and fall; or
• Loss of earning capacity damages resulting from a bicycle accident.

2. Who can participate in the compromise of a claim on a minor’s behalf?

Minors, for the most part, are not able to enter into contracts by themselves. In California, certain types of settlement agreements can be approved by a court so long as the parties follow the proper legal procedure. Generally speaking, the parents of a minor can file the necessary petitions on the minor’s behalf.¹

The following people have the right to file a compromise of a claim:

• Either parent if the parents of the minor are not living separately and apart;
• The parent having the care, custody, or control of the minor if the parents are living separately and apart;
• A guardian ad litem as ordered by a court.²

In some cases, a guardian ad litem is appointed to represent the minor’s interests. A guardian ad litem is a person appointed by a court to represent the legal interests of a person who is not able to do so themselves, such as a child.

3. What is the legal procedure for compromising a minor’s claim?

A California court must approve all settlements done on behalf of a child under the age of 18.³ A parent or guardian ad litem can file an MC-350 form or MC-350EX to petition the court to approve a compromise of a minor’s claim. There may be a filing fee. There are two types of claims which can be filed.

3.1. What are the two types of claims?

If there is no pending action, meaning a lawsuit has not been filed, a settlement agreement can be filed by the:

• parent,
• guardian, or
• guardian ad litem.

If a lawsuit is pending, the settlement agreement petition must be filed by the guardian ad litem of the minor.

3.2. Where must the claim be filed?

If no lawsuit has been filed, the petition must be filed in the county where the minor resides.⁴ If the minor does not live in California, the petition should be filed in a court where a lawsuit would otherwise be proper to be heard.

If a claim has been filed, the petition will be filed in the court where the personal injury lawsuit is taking place.

4. What information must be included in the petition for a compromise of a minor’s claim?

The petition is required to be verified and contain full disclosure of all information that bears upon the reasonableness of the agreement or compromise. The information which must be included in the petition includes:

• Name, date of birth, age, and sex of the minor child;
• Relationship of Petitioner (person filing petition) to minor;
• Description of the nature of the claim, including whether a claim has been filed, is pending, or is the result of a judgment;
• Description of the incident, including date, time, people involved, place, facts, and circumstances of the incident;
• A brief description of the injuries the minor suffered and any treatment received;
• Detailed description of the extent of injuries and recovery. This includes doctor’s reports with a diagnosis of the injuries and a report about the child’s current condition. This may require high-res photographs, such as of any scarring;
• Petitioner must acknowledge that the settlement is both final and binding;
• Description of the amount of the settlement, as well as all terms, including where any settlement proceeds are coming from;
• Disclosure of all medical expenses for which there will be reimbursement by the settlement award (this may include Medicare, Medi-Cal, and/or medical lien documents);
• Disclosure of any requested attorney’s fees and court costs;
• State the entire amount of the settlement agreement;
• Disclose how the proceeds will be handled, including bank names and addresses where the money will be held, a copy of an annuity contract (if applicable), etc;
• Statement that the settlement is fair, reasonable, and in the best interests of the minor;
• Signatures of the attorneys, parties, and petitioner under penalty of perjury.⁵

Filling out this form, and understanding each of the complex topics contained in the form can be difficult if you have to do it on your own. With the help of an experienced attorney at the Shouse Law Group, you can be assured that your petition is filed with the correct information and in the right court.

5. Is there a hearing which has to be held?

The minor and the guardian ad litem must appear at the compromise hearing (except for good cause shown in limited circumstances, such as in wrongful death cases). On the hearing date, the court will decide whether to approve the petition. In determining whether to grant court approval, California judges consider:

• The settlement amount;
• The permanency and severity of the injuries the minor suffered;
• The amount of attorneys fees and court costs that will come out of the settlement funds;
• Where the funds will go once the settlement is approved.

The hearing date will be within 30 days from the date the petition was filed.⁶

6. How are the proceeds from the settlement handled?

California law sets forth specific ways in which settlement proceeds in a minor’s case must be handled.⁷

6.1. What is a blocked account?

A blocked account is a method commonly used to hold a minor’s proceeds from a settlement. The funds are placed into a bank account; that financial institution account can only be released by a court order before the child turns 18. Once the child turns 18, he or she receives the total amount of funds contained in the account.

Blocked accounts are easy to set up and are simply managed. However, if regular disbursements are needed from the settlement to make payments for certain costs it requires a court order each time and can be incredibly cumbersome.

6.2. What is a special needs trust?

If the child has a disability as a result of the accident, or even from previous to the accident, a special needs trust could be imposed. If the child will be unable to work as an adult, a special needs trust can protect that child’s assets and still allow the child to receive public benefits as an adult (“person with a disability”).

6.3. Can the proceeds be distributed to the child’s caretaker?

A person who cares for the child, often called a custodian, can be allowed to handle the proceeds for amounts less than $20,000. Most judges do not prefer this option, but typically prefer blocked accounts for these kinds of settlements.

6.4. What is a minor’s settlement trust?

A minor’s settlement trust grants the minor, the family, and the courts more flexibility in handling the assets from the settlement, and does not require ongoing court supervision. Such a trust can be written to allow a minor to revoke the trust when the minor turns 18, but if they choose not to or fail to choose within 30 days the money can remain in the trust for longer (i.e. 25, 30).

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