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.

The following flowchart shows the step-by-step process of a compromise of a minor’s claim.

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?
• 2. Who can participate in the compromise?
• 3. What is the legal process?
• 4. What must be in the petition?
• 5. Is there a hearing?
• 6. How are the settlement proceeds handled?
• Additional Reading

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

A “compromise of a minor claim” refers to a settlement for money damages in a personal injury case for the benefit of the minor under the age of 18.

Examples of damages in negligence-based personal injury lawsuits include:

• Medical bills from a car accident or an injury that occurred at a 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?

The following people have the right to file a compromise of a minor’s 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;¹
• A guardian ad litem as ordered by a court.²

A guardian ad litem is 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 process?

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 an MC-350EX form for expedited service) to petition the court to approve a compromise of a minor’s claim. There may be a filing fee.

Who can file the claim in court?

If a lawsuit has not been filed, a settlement agreement can be filed by the child’s:

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

If a lawsuit is pending, the settlement agreement petition must be filed by the child’s guardian ad litem.

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 must be in the petition?

The petition must be verified and contain full disclosure of all information that bears upon the reasonableness of the agreement or compromise. This includes:

• Name, date of birth, age, and sex of the minor child;
• Relationship of Petitioner (person filing petition) to the 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;
• Description of the extent of injuries, treatment, 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;
• Acknowledgement 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;
• Disclosure of 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

5. Is there a hearing?

Yes. 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 attorney’s 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 settlement proceeds handled?

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

A Blocked Account

A blocked account is commonly used to hold a minor’s proceeds from a settlement.

The funds are placed into a bank account which can only be released by a court order before the child turns 18. Once the child turns 18, they receive 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.

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”).

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. Though if they choose not to or fail to choose within 30 days, the money can remain in the trust for longer.

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 prefer blocked accounts for these kinds of settlements.

Additional Reading

For more in-depth information, refer to the following scholarly articles:

• A Child’s Voice vs. a Parent’s Control: Resolving a Tension between the Convention on the Rights of the Child and U.S. Law – Columbia Law Review.
• Settling the Personal Injury Claim of a Minor – University of Colorado Law Review.
• Settlement of Personal Injury Claims of Children – North Dakota Law Review.
• Equitable Relief for Minor Beneficiaries – Illinois Law Review.
• Protecting the Rights and Interests of Competent Minors in Litigated Medical Treatment Disputes – Fordham Law Review.

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