Approving Settlements for Minors

In April, 2022, we reported that HB 620 altered how settlements for minors can be approved under O.C.G.A. § 29-3-3, at least in cases where the trial court approves direct payment to a trust. Prior to passage of HB 620, Section 29-3-3 read as follows:

2021 Version

For purposes of this Code section, the term “gross settlement” means the present value of all amounts paid or to be paid in settlement of the claim, including cash, medical expenses, expenses of litigation, attorney’s fees, and any amounts paid to purchase an annuity or other similar financial arrangement.
If the minor has a conservator, the only person who can compromise a minor’s claim is the conservator.
Whether or not legal action has been initiated, if the proposed gross settlement of a minor’s claim is $15,000.00 or less, the natural guardian of the minor may compromise the claim without becoming the conservator of the minor and without court approval. The natural guardian must qualify as the conservator of the minor in order to receive payment of the settlement if necessary to comply with Code Section 29-3-1.
If no 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 for approval to the court.
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 for approval 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 the proposed gross settlement of a minor’s claim is more than $15,000.00, but the gross settlement 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 or less, the natural guardian may seek approval of the proposed settlement from the appropriate court without becoming the conservator of the minor. The natural guardian must qualify as the conservator of the minor in order to receive payment of the settlement if necessary to comply with Code Section 29-3-1.
If the proposed gross settlement of a minor’s claim is more than $15,000.00, but such gross settlement 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 more than $15,000.00, the natural guardian may not seek approval of the proposed settlement from the appropriate court without becoming the conservator of the minor.
If an order of approval is obtained from the court, or a court in which the action is pending, based upon the best interest of the minor, the natural guardian or conservator shall be authorized to compromise any contested or doubtful claim in favor of the minor without receiving consideration for such compromise as a lump sum. Without limiting the foregoing, the compromise may be in exchange for an arrangement that defers receipt of part, not to exceed a total distribution of $15,000.00 prior to a minor reaching the age of majority, or all of the consideration for the compromise until after the minor reaches the age of majority and may involve a structured settlement or creation of a trust on terms which the court approves.
Any settlement entered consistent with the provisions of this Code section shall be final and binding upon all parties, including the minor.

After passage of HB 620, Section 29-3-3 reads as follows:

2022 Version

For purposes of this Code section, the term:
1. “Gross settlement” means the present value of all amounts paid or to be paid in settlement of a minor’s claim, including cash, expenses of litigation, attorney’s fees, and any amounts allocated to a structured settlement or other similar financial arrangement. Such term shall include the total amount paid or to be paid on behalf of all settling parties.
2. “Net settlement” means the gross settlement reduced by:
  1. Attorney’s fees, expenses of litigation, and legally enforceable liens against the settlement that are to be paid from the settlement proceeds;
  2. The present value of amounts to be received by the minor after reaching the age of majority; and
  3. The present value of amounts to be placed into a trust that the probate court or court in which the action is pending approves or creates for the benefit of the minor.
If the minor has a conservator, the only person who can compromise a minor’s claim is the conservator.
1. If the proposed gross settlement of a minor’s claim is $25,000.00 or less, the natural guardian of the minor, without becoming the conservator of the minor and without any court approval:
2. If the proposed gross settlement of a minor’s claim is more than $25,000.00, and the net settlement is $25,000.00 or less:
  1. The settlement shall be submitted for approval to:
    1. The probate court if no legal action has been initiated, or
    2. The court in which the legal action is pending if legal action has been initiated, and such court shall have exclusive jurisdiction to approve the settlement, except as provided in subsection (g) of this Code section;
  2. No conservator shall be required to compromise the claim; and
  3. No conservator shall be required to receive payment of the settlement; provided, however, that the natural guardian receiving payment of the settlement shall thereafter hold and use the settlement for the benefit of the minor and shall be accountable for the same as provided in Code Section 29-3-1.
3. If the proposed gross settlement of a minor’s claim is more than $25,000.00, and the net settlement is more than $25,000.00:
  1. A conservator shall be required to compromise the claim;
  2. A conservator shall be required to receive payment of the settlement and shall thereafter hold and use the settlement for the benefit of the minor and shall be accountable for the same as provided in Code Section 29-3-1; and
  3. Such conservator shall submit the settlement for approval to:
    1. The probate court if no legal action has been initiated, or
    2. The court in which the legal action is pending if legal action has been initiated, and such court shall have exclusive jurisdiction to approve the settlement, except as provided in subsection (g) of this Code section.
1. If an order of approval is obtained from the probate court or a court in which legal action is pending, based upon the best interest of the minor, the natural guardian, next friend, or conservator shall be authorized, subject to Code Section 29-3-22, to compromise any contested or doubtful claim in favor of the minor without receiving consideration for such compromise as a lump sum.
2. Without limiting the foregoing, the compromise may:
  1. Involve a structured settlement or creation of a trust on terms that the probate court or court in which the action is pending approves or creates, including, but not limited to, funding; and
  2. Be in exchange for:
    1. The resolution of the action; or
    2. An arrangement that defers:
      1. Receipt of part, not to exceed a total distribution of $25,000.00 prior to a minor reaching the age of majority; or
      2. All of the consideration for the compromise until after the minor reaches the age of majority.
Any settlement entered consistent with the provisions of this Code section shall be final and binding upon all parties, including the minor.
It shall be within the discretion of the court in which the action is pending to hold a hearing on compliance with the requirements of this Code section; provided, however, that a hearing shall not be required if compliance with such requirements is evident from the record.
1. Notwithstanding any provision of this Code section to the contrary, where a settlement has been submitted to a court for approval, an action shall not be voluntarily dismissed pursuant to subsection (a) of Code Section 9-11-41, or otherwise dismissed upon motion, except upon order of the court in which the action is pending and upon the terms and conditions as that court deems proper.
2. If specifically indicated in the dismissal order, or if a settlement is reached while the case is pending in the Court of Appeals or the Supreme Court, the trial court shall retain exclusive jurisdiction to approve any settlement.
3. If legal action has been initiated but is no longer pending, and the trial court has not specifically retained jurisdiction pursuant to paragraph (2) of this subsection, then any settlement approved by the court in which the legal action is pending as required by subsection (c) of this Code section, shall instead be submitted for approval to the probate court.

Key Changes and What Remains the Same

Both versions provide that if the minor has a conservator, only the conservator may settle the claim.

The dollar threshold requiring court approval, and requiring a natural parent to qualify as the child’s conservator was increased from $15,000 to $25,000.

If a trust is not used and funds are received by a natural guardian or next friend in excess of $25,000, then a conservator must be appointed.

Subsections (c) and (d) have been re-written. Subsection (d), which appears to be an alternative method of approving a doubtful claim, now allows a “next friend” to comprise a doubtful claim if approved by the probate court or the trial court where an action is pending. It also expressly authorizes “creation of a trust on terms that the probate court or court in which the action is pending approves or creates, including, but not limited to, funding.” See subsection (d)(2)(A). If done, then neither the natural guardian or next friend receives or holds funds that belong to the minor because legal title passes to the trustee. This seems to disconnect subsection (d) from subsection (c)(3)(A), meaning that if settlement funds are placed directly into a trust pursuant to a trial court order, they never pass into the hands of a natural guardian or next friend and appointment of a conservator is no longer required. This eliminates the necessity of a secondary proceeding in probate court.

Arguably, one could read subsection (c)(3)(A) as requiring appointment of a conservator anyway, but that would render the next friend language in (d)(1) a nullity, especially since subsection (c)(3)(C) – on one hand – requires a conservator to submit the settlement for court approval, while subection (d)(1) – on the other hand – allows a next friend to take that action. The ordinary rule of statutory construction is that every word shall be given meaning. See, e.g., Gray v. McClendon, 134 Ga. 224 (1910) (The meaning of every word is to be determined by the context); Forrester v. Culpepper, 194 Ga. 744 (1942) (giving meaning to the word “resident”). If addition of the phrase “next friend” had a doubtful meaning then the rule noscitur a socias might allow the court to look elsewhere for meaning, see Beazley v. DeKalb County, 210 Ga. 41 (1953), but “next friend” seems to have a settled meaning. See O.C.G.A. § 9-11-17(c). Applying this rule of statutory construction, subsections (c)(3) and subsection (d) appear to be alternative methods of seeking court approval to compromise a minor’s claim after the effective date of HB 620.

Other provisions in HB 620 support this reading. New language in Section 29-3-1(b) states that a natural guardian or next friend may not receive personal property of the minor until he or she becomes the legally qualified conservator of the minor. However, if funds are paid directly to the trustee of a special needs trust pursuant to the trial court’s order, no funds are ever received by the natural guardian or next friend. This renders subsection 29-3-1(b) moot.

One question that should be considered when seeking trial court approval is whether the trustee should give bond. If the trustee is a professional or an institution with adequate insurance or assets to cover losses, then bond should be unnecessary. If the trustee is an individual, then this question requires further deliberation.