The check arrives. It may be for six or even seven figures, the result of a long and harrowing civil lawsuit on behalf of a minor. For the parents, the first feeling is relief. A chapter of pain and legal battles is finally closed. But a second, heavier feeling often follows—the profound responsibility of stewardship.
This money is not a lottery win. It is a substitution, an attempt by the justice system to provide for a future that has been irrevocably altered. It is intended to pay for a lifetime of potential needs—therapy, specialized education, medical care, and a stable foundation for adulthood. The question I often discuss with families in this situation is not just how to invest the money, but how to protect it. How do you shield these funds from misuse, from creditors, and even from the child’s own immaturity when they turn 18?
The Fiduciary’s Burden
When a minor receives a significant sum of money, their parents or legal guardians become fiduciaries. That is a legal term with real weight. It means you have a duty to act solely in the child’s best interest, a standard scrutinized by the courts. Simply depositing the funds into a standard savings or brokerage account is rarely sufficient and often ill-advised.
The greatest risk is often the child. A Uniform Transfers to Minors Act (UTMA) account is a common tool for smaller gifts, but for a large settlement, it has a critical flaw. New York law requires the funds be turned over to the child, without restriction, upon reaching the age of majority—18 or 21. I have seen the unfortunate aftermath of an 18-year-old, still grappling with significant trauma, suddenly gaining control of a life-altering amount of money. The results are rarely positive.
This is where deliberate, intentional planning becomes essential. The goal is to build a structure that provides for the child’s needs today while preserving the capital for their needs decades from now.
The Trust as a Protective Structure
For these situations, the most effective instrument we have is an irrevocable trust. A properly drafted trust acts as a shield. It creates a legal entity to hold and manage the settlement funds, governed by a set of rules you establish from the outset.
The key figure is the trustee. While a parent can serve, we often recommend appointing an independent professional or a corporate trustee. This is not a slight against the parent’s love or judgment. It insulates the parent from having to say “no” to their child and places financial decisions in the hands of an objective third party. A professional trustee has a fiduciary duty to follow the trust’s instructions—and only the trust’s instructions—ensuring the money is spent prudently on education, health, and maintenance.
A trust can be designed with remarkable specificity. We can draft provisions that:
- Pay for all therapy and counseling without limit.
- Fund a college or vocational education.
- Provide a down payment for a first home at age 30.
- Distribute principal at milestone ages—for instance, one-third at 25, one-third at 30, and the remainder at 35.
- Protect the assets from the child’s future creditors or a divorce.
This structure replaces the all-or-nothing cliff of a UTMA account with a gradual, supportive framework for financial maturity.
Surrogate’s Court and the Path Forward
In New York, the courts are deeply involved in protecting minors. Under Article 17 of the Surrogate’s Court Procedure Act (SCPA), any settlement for a minor generally requires a judge’s approval. The court’s primary concern is the child’s welfare. A judge in the Manhattan Surrogate’s Court will want to see a clear, prudent plan for managing the funds.
Presenting the court with a well-designed trust demonstrates that the family has thought carefully about their child’s long-term future. It shows a commitment to stewardship that goes beyond the immediate moment. The legal process of finalizing the settlement and the process of planning for the child’s financial future should happen in parallel. One is about securing justice for the past; the other is about securing a stable life for the future.
Stewardship. It’s a heavy word, but it is the right one. The settlement marks the end of one fight, but it is the beginning of a lifelong duty of care. The choices made in the months following the settlement will echo for the rest of the child’s life.
If your family is facing this situation, the immediate priority is to formalize a financial plan for the proceeds. We can schedule a confidential meeting to discuss the specific trust structures that will protect and preserve your child’s settlement for the long term.
