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STEPS FOR COMPLETING A SETTLEMENT WITH A MINOR

Kentucky law requires that all minor settlements be approved by a court. Court approval is needed no matter the amount of the settlement, the parties involved, and regardless of whether a civil action has been filed. Minor settlements and the administration of the estates of minors are governed by KRS 387.010 through KRS 387.330.

For all minor settlements at or above $10,000, the settlement must be approved by a district court. In nearly all circumstances, the proper district court is where the minor resides. For the settlement to be binding and enforceable, the district court must also appoint a guardian for the minor, where the guardian will serve as the recipient and manager of the settlement funds, the signor of a release, and executor of the settlement. Orders detailing the appointment of the guardian and approval of the settlement with the specific requirements placed on each of the parties, including the guardian's authorization to sign a release must be filed and entered by the court.

While the guardian is often a parent of the minor, a different person or entity capable of taking on the fiduciary responsibilities of being a guardian can serve when necessary. Most district courts will not appoint a guardian with a criminal history. The minor should be involved in the appointment of the guardian if he or she is 14 or older.

As part of the settlement, the guardian will sign and file a bond. The court will require surety on the bond unless the settlement proceeds are placed into a blocked account. Placement of the settlement funds in a blocked account is the preferred route as this option requires the guardian to seek and obtain court approval before any funds can be released from the blocked account. Any decision not requiring the funds to be placed in a blocked account should be made by the district court and reflected in the order approving settlement.

KRS 387.280 provides an alternative route for the parties and courts to approve minor settlements when the settlement is for an amount less than $10,000. When there is a civil action pending and the settlement is for less than $10,000, then the court where the civil action is pending can approve the settlement. The court can order that the settlement money be paid directly to the person having custody of the minor without giving bond or surety so long as the settlement proceeds are expended solely on the support, maintenance or education of the minor.

When the amount of the settlement is for less than $10,000 and no civil action is pending, district court approval is required. In this situation, the district court has the option of ordering that the settlement money be paid directly to the person having custody of the minor without giving bond or surety so long as the settlement proceeds are expended solely on the support, maintenance or education of the minor. Again, placement of the settlement funds into a blocked account is the preferred route, subject to the direction of the court.

The bottom-line is that all minor settlements must be approved by a court. The orders entered by the court should detail the specifics of the settlement and the requirements to be placed on each of the parties. If done correctly, the insured, company, and attorneys will be relieved from any future liability.

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