Under Missouri law, a person under the age of eighteen (18) cannot enter into a legally binding contract. This includes a contract to settle a claim associated with an accident, or what is typically referred to as a settlement agreement. However, a minor involved in an accident is often required to enter into a settlement agreement where the minor releases the opposing party from liability in exchange for the mutually agreed upon settlement amount. Missouri has traditionally required court approval of these minor settlements to ensure that the minor’s interest is dutifully represented, and that the settlement amount is managed in the minor’s best interest. While protecting the minor’s assets is a noteworthy goal, the associated hearings, travel cost, and time expended can be costly to the involved parties, especially on claims of lower value.
In order to expedite the approval of these minor settlements, Missouri has enacted a relatively new statute under R.S.Mo 436.700, which is known as the Missouri Statutory Thresholds for Settlements Involving Minors Act. Most notably, this statute allows for a minor’s claim under the threshold of $35,000.00 to be settled by the minor’s custodian, or parent, without court approval. As opposed to the traditional method of petitioning the court and scheduling a hearing to obtain the necessary approval in front of a judge, a minor’s legal custodian may now simply enter into a settlement agreement on behalf of the minor. To be compliant with the statute, the custodian must sign an affidavit stating that they have legal custody of the minor, they have made a reasonable investigation into the claim, and the minor will be fully compensated by the settlement.
The statute also has certain provisions that govern the way the settlement proceeds are to be paid out. The key is whether the minor is being represented by an attorney or not. An issue the attorneys at Gausnell O’Keefe & Thomas often see is when the minor is not represented by an attorney, the settlement proceeds must be deposited into a Uniform Transfer to Minor Account (UTMA). This requires the parent, or the person who has custody of the minor, to open a UTMA account at a financial institution of their choosing. This is often an additional step that the adult representing the minor may not have been aware of to finalize the settlement, and thus they may have the following questions:
What is an UTMA account?
- A Uniform Transfer to Minors Account is a custodial account where the adult who opens the account is responsible for managing the funds, but the account and its holdings legally belongs to the minor. The purpose of this accounts is to ensure that the settlement funds are managed in the minor’s best interest and most importantly that the funds are available for the minor once they become an adult. Custodial accounts for minors are commonly used to save for college, and the benefit of an UTMA account is that you can transfer assets to a child without creating a trust, which could be more challenging and expensive to open.
How do I set the UTMA account up?
- That is a conversation to be had with the financial institution of your choosing. Most major banks are a familiar with the Uniform Transfer to Minor Accounts. A brief introductory conversation stating that the minor was involved in an accident and has thus reached a settlement should suffice for the bank representative to provide you the paperwork to create the UTMA account.
Who will have access to the money within this account?
- As discussed above, the UTMA account is custodial in nature. Meaning that once the minor reaches 18 years old, the custodianship is over, and the assets within the account will be transferred to the minor. Until then, R.S.Mo 436.700 limits any access to the funds within the account. There are a few exceptions that include obtaining a court order to access the funds or at the direction of a duly appointed conservator. Another more broadly worded exception to the otherwise limited access of the funds involves the discretion of the custodian of the UTMA account. Meaning that there may be scenarios where the custodian of the account can make the decision to withdraw funds, but any withdrawal must be done solely for the benefit of the minor. That discretion of the custodian is another conversation that must be had with the bank overseeing the account and is not a certainty.
So, if you are settling a claim on behalf of a minor, we hope that this answers some of your questions, and if we can be of further assistance, please let us know how we can help.
Article written by Associate Attorney Tyler Opel | Gausnell, O’Keefe & Thomas, LLC