But It’s Such a Small Minor Settlement: Do I Really Need Court Approval?

WDC Journal Edition: Winter 2020
By: Kristen S. Scheuerman, Herrling Clark Law Firm, Ltd., Heather L. Nelson, The Everson Law Firm, and Ryan J. Garrison, Garrison Financial, LLC and Garrison Settlements

If you have settled a claim involving a minor, you should be familiar with Wis. Stat. § 807.10. Specifically, § 807.10(3) says:

If the amount awarded to a minor or individual adjudicated incompetent by judgment or by an order of the court approving a compromise settlement of a claim or cause of action of the minor or individual does not exceed the amount specified under s. 867.03(1g), exclusive of interest and costs and disbursements, and if there is no guardian of the ward, the court may upon application by the guardian ad litem after judgment, or in the order approving settlement, fix and allow the expenses of the action, including attorney fees and fees of guardian ad litem, authorize the payment of the total recovery to the clerk of the court, authorize and direct the guardian ad litem upon the payment to satisfy and discharge the judgment, or to execute releases to the parties entitled thereto, and enter into a stipulation dismissing the action upon its merits. The order shall also direct the clerk upon the payment to pay the costs, disbursements, and expenses of the action and to dispose of the balance in a manner provided in s. 54.12(1), as selected by the court. The fee for the clerk's services for handling, depositing, and disbursing funds under this subsection is prescribed in s. 814.61(12)(a).[1]

There seems to be a lot of confusion over the “threshold” referenced in the bolded text (which, by the way, is $50,000).[2] On both sides of the aisle, we have heard something along the lines of, “you do not need court approval for settlements under $50,000,” but a careful reading of § 807.10 reveals that this conclusion misses the mark. Regardless of the size of a settlement, “a minor cannot be bound by an extrajudicial settlement.”[3] Accordingly, “a calculated risk is taken in striking a bargain without the benefit of judicial approval.”[4]

So why do we not all just seek court approval in minors’ claims in every case? Although every case is different, there are often concerns about delay, cost, and frankly uncertainty about the process and what to do with a minor’s funds. These concerns all seem heightened when the settlement amount is, well, minor. Even in a modest minor settlement case, we do not think any of these concerns outweigh the benefit of court approval. Court approval protects the insurance company and its insured and secures a binding settlement. From the defense point of view, although in some cases retaining a guardian ad litem and obtaining court approval may come with some cost, the peace of mind achieved by entering into an enforceable settlement – and avoiding a claim resurfacing many years later when new injuries are claimed to be related to the accident – can be well worth the investment. For represented minors, court approval provides a judicially sanctioned layer of confidence and affirmation with respect to the settlement value and the method of securing the funds for the benefit of the minor.

Assuming you decide to seek court approval, a guardian ad litem is going to need a plan for what to do with the settlement funds on behalf of the minor. Most of us are generally familiar with a structured settlement (and most courts are familiar with this option as well). However, given recent changes in the market, it is difficult to structure less than $10,000 in funds.

The authors of this article recently worked on a case together (Heather L. Nelson represented the insurer, Kristen S. Scheuerman was appointed guardian ad litem, and Ryan J. Garrison helped create an investment vehicle for the minor’s funds) that involved a very modest settlement (under $10,000). The minor was just four years old at the time. Because the minor was so young, putting his funds into a blocked or restricted bank account was not entirely attractive given the nominal to non-existent interest rates that would yield him essentially no additional meaningful income over time. Because we did not have more than $10,000 to invest, a structured settlement was also not an option. We ended up creating a UTMA (Uniform Transfers to Minors Act) account with a “no cash out” restriction held at TD Ameritrade. Our case was venued in Brown County and the following language was approved by the Court:

$XXX.XX for the benefit of Minor Child to be placed into an UTMA account, invested specifically as follows: $XXX.XX will fund an UTMA account established for the benefit of Minor Child by the Custodian, Jane Doe, held at TD Ameritrade for Minor’s sole and exclusive benefit, managed by Ryan J. Garrison of Garrison Financial, LLC, and shall be managed using a mix of bond mutual funds, stock/equity indexes, and cash. The bond allocation should maintain a range of 70-75% and the Minor’s stocks/equities should be in the range of 20-23%. Due to market volatility these allocations may grow outside of the above-detailed allocation for a period of time with the intent to be reallocated back within these originally-described parameters. The third asset class in Minor’s account will be cash, which is to be maintained at less than 3% allocation to cash. This may fluctuate based on trading but will usually fall between 1-3% of the portfolio. The funds invested on behalf of Minor Child may not be removed from the supervision and management of Garrison Financial, LLC, and it is the intent of this Order to instruct TD Ameritrade to hold these funds under a “no cash out” restriction (excepting the re-investment parameters described herein) prior to Minor Child’s 18th birthday without a court order. Upon Minor Child’s 18th birthday (DOB), Minor Child shall have the sole right and responsibility for investment choices and may, if he so chooses, withdraw any or all funds or have the option of leaving the funds invested in an effort to continue to earn interest and/or dividends. Funds may be added to the UTMA at any time without the need of a court order, but funds added will be under the same “no cash out” restriction.

Within the Petition for Approval, the risk tolerance for the investment plan was explicitly described, with reference to a 10+ page comprehensive financial disclosure document. The risk tolerance for this specific plan was rated as 14/100, which is also described as “conservative income.” We also provided to the court (and of course to the minor’s parents) some market data showing the past performance of the underlying investments with both the return annualized since inception and the max draw down transparent.

Unlike a blocked bank account where there is no risk of loss on the initial principal, there are no guarantees on potential yield income with this type of investment and a loss of principal is a possibility. However, like any choice, a thorough, rational, and honest discussion must be had with the minor (if he or she is old enough), the minor’s parents, and the minor’s counsel (if the minor is represented) about the positives and negatives of an investment like this. It is also reasonable to rely on data and the advice of financial investors, which we did in this case, to decide about investing funds. For example, we did not choose “high risk” stocks or equity indexes, which made the likelihood for loss on the minor’s principal much less, even though a higher risk stock may have produced a greater potential yield given the amount of time the funds would be invested. Risk and reward were very much balanced out in the final decision for this minor. We also looked at historical trends and anticipated market performance and without any guarantee or promise, we estimated that this young person would earn approximately $10,000.00 on his principal investment by the time he turned eighteen. Compared to other available options, the minor’s parents were satisfied that this was a wise investment choice and most importantly, the guardian ad litem was able to represent to the court that this funding vehicle was in the minor’s best interest.

The facts of every case must be considered when determining an appropriate investment vehicle or funding mechanism. If you find yourself with a modest amount of settlement funds for the benefit of a minor, however, it is encouraging to know that Wisconsin courts may be open to an UTMA investment fund.

Author Biographies:

Kristen S. Scheuerman is a Shareholder at Herrling Clark Law Firm, Ltd, in Appleton, Wisconsin. Kristen earned her JD from Marquette University Law School in 2010. Her practice is primarily devoted to plaintiffs’ personal injury cases, but she also handles municipal prosecution for a local municipality. She is an active member of the Wisconsin Association for Justice and is currently serving as Vice-Chair of the State Bar of Wisconsin’s Litigation Section. Kristen enjoys legal education and serves as a Program Chair for WAJ’s Education Program Committee and she is a regular feature on “The Lawyers,” a legal education segment featured on WHBY’s “Fresh Take” with Josh Dukelow. In early 2020, Josh and Kristen teamed up to produce a weekly podcast, Civic Revival, which focuses on legal stories in the news and the role of Rule of Law in politics and civic life.

Heather L. Nelson is a Shareholder at The Everson Law Firm in Green Bay. She is an experienced trial attorney, having successfully tried cases before juries in state and federal courts throughout Wisconsin and Illinois. She obtained her J.D. from DePaul University College of Law in Chicago and launched her legal career in the Chicago area. Heather became licensed to practice law in Wisconsin in 2000, defending cases in both Illinois and Wisconsin. Joining The Everson Law Firm in 2016 brought Heather back to her Green Bay roots. Her practice areas include motor vehicle accident, premises liability, wrongful death and products liability. She serves on the Board of Directors of Wisconsin Defense Counsel and as Chair of WDC’s Women in the Law Committee. Heather has been active in presenting CLE topics for at WDC conferences and most recently at the North Central Trial Academy.

Ryan J. Garrison is the Founder and President of Garrison Financial, LLC and Garrison Settlements. Together these companies offer trial lawyers and injury victims the most comprehensive and unique financial solutions in the country. As a financial adviser, Ryan specializes in personal injury settlements and tax planning attorney contingency fees. On the settlement side, Ryan focuses on catastrophic injury, traumatic brain injury, and minors’ settlements. Ryan enjoys working to understanding clients’ needs, and believes he brings candor and honesty to an industry that has confused and misled many individuals. Ryan Garrison is a Registered Representative offering Securities and Advisory Services through United Planners Financial Services of America, a Limited Partnership, Member FINRA, SIPC. Garrison Financial and Garrison Settlements are not affiliated with United Planners.



[1] (Emphasis added.)

[2] See Wis. Stat. § 867.03(1g).

[3] In re Andresen, 17 Wis. 2d 380, 382, 117 N.W.2d 360 (1962).

[4] Id.