The majority of claims are settled by claims professionals without involving attorneys or litigation. These settlement agreement are contracts. Generally, contracts entered into by minors are voidable at the election of the minor when she reaches the age of majority.
The majority of claims are settled by claims professionals without involving attorneys or litigation. These settlement agreement are contracts. Generally, contracts entered into by minors are voidable at the election of the minor when she reaches the age of majority. See O.C.G.A. § 13-3-20; Holland v. Peerless Furniture Co., 60 Ga. App. 149 (1939). Thus, a settlement purportedly made with a minor (or her parents) is not a conclusive resolution of the claim until the minor reaches majority and affirms the agreement. Such a situation creates unacceptable uncertainty in the claims resolution process given that a final resolution could take almost eighteen years. Settling claims by minors requires special attention to the legal procedures required to create binding settlement agreements. This article will analyze the legal requirements for compromising minors’ claims under Georgia law and provide practical advice for avoiding potential complications and pitfalls.
Can the parents settle the claims of their minor child without court approval?
It would seem obvious that a parent (or natural guardian) should be able to settle the claims of their minor children as parents generally have the authority to make decisions about the welfare and care of the children. Unfortunately, not all parents act with the best interest of the child’s future financial health. In order to protect the interests of children, Georgia law limits the ability of parents to settle the claims of their minor children without court approval. See O.C.G.A §29-3-1 et seq. To determine whether and when court approval is required, there are a series of questions that need to be answered.
Is the value of the settlement $15,000 or less?
Under Georgia law, “The natural guardian of a minor may not receive the personal property of the minor until the natural guardian becomes the legally qualified conservator of the minor.” O.C.G.A. § 29-3-1(b). However, when the total value of all personal property of the minor is $15,000.00 or less, the natural guardian may receive, hold and use all or part of the personal property for the benefit of the minor without being legally qualified as a conservator to that personal property. Id. Thus, if the settlement is for $15,000 or less, the minor’s parents can settle the claim without court approval or appointment as a conservator.
In claims involving settlements for $15,000 or less, the proposed release to be executed by the parents must also include an affidavit by the parents attesting to the fact that (a) the value of the minor’s property will not exceed $15,000; (b) no conservator has been appointed; and (c) the affiant is the natural guardian of the minor. O.C.G.A. §29-3-1(c).
- Practice Tip: In cases involving settlements that are more than $15,000 it may be possible to allocate a portion of the settlement to claims by the parent(s) for loss of services of the minor such that the total amount to the minor is not more than $15,000. However, this allocation needs to be part of the original settlement negotiations and agreement, and the portion allocated to the parents should not be more than that allocated to the minor’s claims.
Is the value of the settlement more than $15,000?
If the value of the settlement to the minor is more than $15,000, then the parents cannot settle the claims without court approval. O.C.G.A. § 29-3-3.
- Practice Tip: The probate court of the county where the minor resides is typically the venue where a petition to approve the settlement should be filed. The Georgia Probate Courts have standards forms that should be used when filing such actions. These are available as fillable PDFs at http://gaprobate.gov
Is a court-appointed conservator required?
Once it is determined that court approval is required, the next issue is whether a conservator must be appointed by the court before the court will approve the settlement. The statutory language answering this question is not a model of clarity. However, the application of this framework is not so complicated.
Will attorney’s fees, expenses, and structured settlement purchases reduce the present payout value of the settlement?
If the settlement amount is less than $15,000 after subtracting attorney’s fees, expenses of litigation, outstanding medical, and the cost of any annuity or structured settlement, then the minor’s parents or natural guardians may seek approval of the proposed settlement from the court without becoming the conservator of the minor. O.C.G.A. § 29-3-3(f). Conversely, if the gross settlement is more than $15,000 after subtracting such fess, expenses, and costs, then a conservator must be appointed before the court will approve the settlement. O.C.G.A. § 29-3-39(g).
- Practice Tip: The parties should discuss early in the claims settlement process whether any portion of the settlement will be structured with payments to begin after the minor reaches 18. If the parents are open to structuring all but $15,000, the trouble and expense of a conservatorship can be avoided.
Who should be appointed as conservator?
Assuming that a conservator is required, the next issue to consider is who should be appointed as the conservator(s). The parents are the most obvious parties to seek appointment as conservators, but Georgia law provides for appointment to “best serve the interests of the minor.” O.C.G.A. § 29-3-7(b). While the parents may generally be the preferred conservators, the role of conservator requires certain actions and responsibilities that some parents may not be able to perform. For example, the conservator must maintain a separate bank account for the assets of the minor, file yearly inventories of the minor’s property, and submit for approval by the court a spending plan on behalf of the minor. See O.C.G.A. § 29-3-21.
Experience indicates that the greatest difficulty may be the requirement that the conservator “shall give bond with good and sufficient security” to cover the value of the minor’s assets. O.C.G.A. § 29-3-41. The availability and amount of the bond is based on the credit worthiness of the proposed conservators. It may be difficult or impossible to obtain a bond for individuals with poor credit. If the parents’ credit is insufficient to obtain a bond, then the court will not appoint them as conservators and some other individual must be selected.
If the parents or some other adult relative are unable to meet the requirements and qualifications for appointment as conservator, a county conservator is an option that should be considered. County conservators bring knowledge, experience, and professionalism to the role that can make the process of managing the minor’s estate simpler and more efficient. County conservators also have few problems obtaining the required bond and can often obtain the bond at more favorable rates than a parent can due to the volume of conservatorships they manage.
Before agreeing to the use of a county conservator, the parents or guardians should be informed that a conservator is entitled to a commission from the minor’s estate equal to 2.5% of all income received during the course of the previous year, 2.5% of all disbursements over that year, 10% of interest earned during that year and .5% of the total value of the conservatorship assets at the close of each accounting period. See O.C.G.A. §29-3-50. The parents or guardian should realize that these yearly commissions will reduce the total assets available to the minor when she turns 18.
- Practice Tip: The issue of the conservator’s bond should be addressed at the outset of settlement discussions. A court may permit the bond to be paid from the minor’s estate, but courts are generally unwilling to do so unless the parties agreed to such a payment as part of the initial settlement.
While the settlement of a minor’s claims is more complex than the settlement of an adult’s claims, the process can move forward efficiently if the parties address and resolve potential complications in their initial settlement discussions and agreement.