by John Darer CLU ChFC CSSC RSP
Should large cash settlement payments be given to young adults? While petitions for infant compromise that include structured settlements, are generally approved in Supreme Court, there is resistance in some quarters, notably in the Surrogates Court for Kings County, where the structured settlement has not been a condition of settlement.This blog post is a shout out to parents, judges, lawyers, lawmakers and a certain Surrogate in New York City.
Should structured settlements for minors be required to make all payouts by age 18?
Consider these real life stories...
I. An impetuous Connecticut college student grew impatient while in line to pay Spring 2013 tuition at the University of Connecticut ("UConn" ) bursar's office and took the tuition money (half of which was contributed by Dad) , drove two hours to Foxwoods Casino and blew it all. Needless to day his father was NOT "Gaga" at his "Poker Face".
II. Last week's Ask Amy column provides an illustration of financial immaturity in a young adult.The nationally syndicated story is about a reader's 22-year-old stepson who:
- has been attending classes at a community college for four years and has yet to earn a degree!
- spent some of his financial aid money last year to buy his girlfriend an engagement ring. (His fiancee’s mother has now let him move into her home.)
- needed $500 worth of repairs for his car, and instead of fixing it he went out and bought a $3,000 car with financial aid money. That car broke down in a week.
- took out a student loan for $8,000 because he needed money to pay off his credit cards.
- borrowed $600 from his grandmother for school supplies. Granny then called her husband saying she needed her $600 back, so her husband paid her back, but did not require his son to repay the father and stepmom!
The reader is perplexed because her husband states they should do nothing because his son is grown and can make his own decisions. Her hubby says he has talked with his son and he won’t listen, so he has to suffer the consequences of his decisions and actions.
III. An 18 year old preppy kid structures the bulk of his recovery from a wrongful death lawsuit arising out his father's death, holding out 10% for college tuition. Sometime later he sells some of the remaining structured settlement, intending to use the proceeds to replaced the lost college money (and go to college) and blows that too.
A structured settlement is an important component of a settlement plan for a minor or a young adult. Engaging a settlement planner as early as possible will help assure that a proper fact finding is performed without time pressure, a balanced allocation between cash and structure is considered and perhaps most importantly important financial education is dispensed.
Tip for Parents of Rampant Spenders
Parents who exercise joint control over bank accounts for teenagers must be careful to keep them in good standing. Overdrafts, bounced checks and other similar issues can seriously impact the credit scores of joint account-holders and quickly turn a supposedly educational venture into a credit nightmare.