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Minor Settlements Revisited

November 02, 2006 BY Def Admin

A couple of years ago, I wrote an article discussing settling the claim of a minor in the state of Georgia.Since that time, the legislature has repealed those laws in favor of a new set of statutes governing these settlements. The goal, I think, of many of the changes was to avoid some of the problems encountered under the old rules. It has now been over a year since the legislature enacted O.C.G.A. §29-3-3, so there has been some time to observe the practical effect of these changes. So far, it appears that he new statutes have improved the process in some areas, while creating greater confusion in others.

One of the major changes that at first glance simplifies the process is creation of a more definite threshold amount for when probate approval is required. In the old statute, when the settlement amount was between $5,000.00 and $10,000.00, the judge had discretion as to whether the parents needed to be bonded as guardians of the property of minor. Anything less required no court qualification of the natural guardian.Anything more and qualification was required. The new statute removes the terms “guardian of the property” in favor of “conservator.” It sets a threshold of $15,000.00 so that if the parents (or whomever is to receive the money for the minor) are to receive more than $15,000.00 at the time of the settlement, they must be bonded as conservators to hold the money until the minor reaches majority. The basic petitions to be submitted have not changed a great deal. So far so good.

Still, there is room for some discretion on the part of the probate judge. O.C.G.A.§29-3-3(f) provides:

If the proposed gross settlement of a minor’s claim is more than $15,000.00, but the gross settlement is reduced by:

(1) Attorney’s fees, expenses of litigation, and medical expenses which shall be paid from the settlement proceeds; and

(2) The present value of amounts to be received by the minor after reaching the age of majority

is $15,000.00 of less, the natural guardian may seek approval of the proposed settlement from the appropriate court without becoming conservator of the minor.

What leaves the court with some discretion is the phrase “the natural guardian may seek approval from the appropriate court.” That is to say, that even if the gross settlement reduced by the above factors is below $15,000.00, the court still may require that the natural guardian become the conservator of the minor. In such cases, even when the natural guardian may not be required to qualify as conservator, they are required to submit a petition to the probate court for approval of the settlement. At this point, the discretion of probate judges to require natural guardians to be approved as conservators is very broad. There do not appear to be any guidelines for making this judgment.

An improvement in the law regulating minor settlements is in how settlements of less than the threshold amount are handled. The pre-2005 rules were silent as to the accountability of the natural guardians for accepting the funds. They allowed the parents to accept the money and that was end of it. It was completely up to the ethical makeup of the parents as to whether the minor would ever receive the money upon reaching majority. The risk to the payor of the settlement was that the minor, upon reaching the age of majority might file an action against the tortfeasor seeking the money that was spent by the parents.

O.C.G.A.§29-3-1(b) addresses this issue by including the language that after receiving property of a minor totaling less than $15,000.00, the natural guardian “shall thereafter hold and use all or part of the personal property for the benefit of the minor and shall be accountable for the personal property.” This language should reduce the risk of actions against the payors of the settlements by the minors upon reaching majority when the money is gone. The law makes it clear that the natural guardians are accountable.

The new statutes also fail to address what happens when the natural guardian settles a claim, but then fails to follow through with the settlement. It is my understanding from my conversations with clerks in a few probate courts that the probate judge is powerless to enforce a settlement, even if the petitions have been submitted. They cannot force the natural guardians to appear for a hearing. If the natural guardian has not signed a release at this point, the penalty for failure to appear at a hearing is that the settlement will not be approved. The only remedy, then would be to file an action in a trial court to seek enforcement of the settlement. Such a task could prove costly, and then there is no guarantee the settlement would be approved by the probate court if a trial court granted a motion to enforce settlement.

The most problematic area of the new code is when the matter is already in suit. Under the old statute, when a case was already in suit, the trial court was required to approve any settlement involving a minor, regardless of the settlement amount. The trial court was then left with the discretion to set bond for the guardians to hold the property of the minor. There were no guidelines as to how much the bond had to be. The problem with the rules at that point was that it made no provision for overseeing the proceeds of the settlement once the guardians took possession of them. So, it was entirely possible that a guardian could pay a nominal bond and then go spend the proceeds from a huge settlement. The only penalty would be to forfeit the bond.

The new statute allows for the settlement of a matter in which legal action has been initiated, but the gross amount s under $15,000.00 to be settled by the natural guardian without any court intervention.However, if the gross settlement is greater than $15,000.00 and legal action has been initiated, court approval is necessary. O.C.G.A. §29-3-3(e) provides:

If legal action has been initiated and the proposed gross settlement of a minor’s claim is more than $15,000.00, the settlement must be submitted to the court in which the action is pending. The natural guardian or conservator shall not be permitted to dismiss the action and present the settlement to the court for approval without the approval of the court in which the action is pending.

If you are reading this section and scratching your head, be assured that you are not alone. The “court” to which the settlement would be presented for approval after the approval of the court in which the action is pending is presumably intended to be the probate court. As a practical matter, however, I have encountered situations in which both the plaintiff’s attorney and the trial court judge disagreed with my position. They insisted that the trial court had the ability to approve the settlement and set bond as was permitted under the old statute. It took a call to the probate court of the county in which the minor was situated to convince opposing counsel that this was not so.

At this point, there is no case law to provide an interpretation of this language. It is not a far stretch of the imagination to suppose that there have been a number settlements that have occurred for matters in suit that were not finally approved by the probate court. This presents a very real danger to the payors of these settlements as the minors in these matters reach the age of majority. If the courts find that the settlements were not legitimate, it stands to reason that these same payors may face liability again for the matters they believed they had settled.

The bottom line in all of this confusion is in the bottom line. The fact that there remain so many areas for confusion means that consummating minor settlements can be very time consuming, and therefore, costly.Clearly it is debatable whether the efforts of the legislature have improved the procedure for minor settlements.One can only hope that it is still a work in progress and, over time, they will refine the statutes to make the process smoother.

The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved. 

Editorial Board:

H. Michael Bagley