A family receives a settlement offer for their child, a victim of abuse. The amount is significant—enough for a lifetime of care. After the attorneys are paid, a critical question remains: what do we do with the money? Simply depositing it into a savings account is not just imprudent; under New York law, it is often forbidden. The court, and a prudent family, must plan for the long-term stewardship of that child’s future.
I have seen these situations unfold. The legal battle to secure a settlement is exhausting, but the work that follows is just as critical. The funds are not a windfall. They are a replacement for what was taken from a child—security, health, and an untroubled youth. The goal is to make those funds last a lifetime, providing for therapy, education, housing, and anything else the child needs to build a stable adult life. This requires a deliberate, structured plan.
The Court’s Role and the Need for a Trust
When a minor receives a significant settlement, the funds do not go directly to the parents. The court must approve the settlement to ensure it is in the child’s best interest. A judge will demand to know exactly how the money will be protected until the child is an adult, and often, long after.
This is where a trust becomes essential. A trust is a legal structure where assets are held by a trustee for the benefit of the child. Without one, the funds might be placed in a court-controlled account, which is restrictive and difficult to access for the child’s needs. Worse, the entire sum could be turned over to the child on their 18th birthday. An 18-year-old, no matter how mature, is rarely prepared to manage a life-altering amount of money—especially when it is tied to profound trauma.
A properly drafted trust accomplishes several goals:
- Protection from Creditors: The funds are shielded from the parents’ creditors or legal troubles, and later, from the child’s own.
- Long-Term Management: The money can be managed by a responsible trustee—a family member or a professional—who invests it prudently and distributes it according to the child’s needs over decades.
- Preservation of Benefits: If the child’s injuries result in a lifelong disability, a Supplemental Needs Trust (SNT) can hold the settlement funds without disqualifying them from essential government benefits like Medicaid or SSI.
Fiduciary Duty: More Than Just Managing Money
The person or institution chosen to manage the trust is the trustee. Their role is governed by a strict legal standard known as a fiduciary duty—the highest standard of care under the law. This means the trustee must act solely in the best interests of the child, without conflict of interest, and with prudence and diligence. Stewardship.
Choosing a trustee is one of the most important decisions a family will make. It could be a trusted relative, but the family must ask honestly if that person has the financial acumen, emotional detachment, and time to manage the funds properly. Often, a professional or corporate trustee is a better choice. They have expertise in investing, accounting, and handling complex distributions for medical care or education. Their job is to ensure the trust’s purpose is fulfilled, providing a buffer between the money and the complex emotions tied to it.
The Legacy of the Child Victims Act
In recent years, we have seen more of these cases in New York because of the Child Victims Act (CVA). This law, codified in part under CPLR § 214-g, temporarily opened a window for survivors of child sexual abuse to file civil lawsuits, regardless of when the abuse occurred. While that look-back window has closed, the CVA changed the landscape permanently by extending the statute of limitations for future cases.
The result is that more institutions and individuals are being held financially accountable. This is a victory for justice, but it creates a new set of responsibilities for the families of survivors. The legal architecture we use—trusts, guardianship proceedings in Surrogate’s Court, and fiduciary oversight—is designed to convert a monetary settlement into a lifetime of security for a child who has endured the unthinkable.
Structuring a minor’s settlement is not about restricting a child’s access to their own money. It is the opposite. It is about building a fortress around it, ensuring the resources intended to help them heal and thrive are protected for as long as they are needed.
If your family is anticipating a settlement on behalf of a minor, the first step is to understand the structures available for protecting those funds. We offer a confidential consultation to review the role of a trustee and the types of trusts that can provide lifetime support.
