Custodian Funds Held for the Benefit of a Minor in Maryland
Although it is the general expectation of the society that minors’ interests are safeguarded by their parents or legal guardians, when a minor received a personal injury settlement or judgment award, the American legal system is designed to protect those funds from those adults. Generally, the state law in the US establishes a system through which the funds recovered in a personal injury action on behalf of a minor are kept in a special custody until the beneficiary reaches the age of majority. Below is the description of the legal requirements in Maryland, as to how those funds are safeguarded, and under which conditions, the law allows withdrawal of certain amounts from those funds.
Generally, Maryland laws do not require a court approval for claims settlement with minors if the minor’s “next friend” (that is how they call a person who is rightfully representing the minor in court) for the claim is his living parent. However, if the next friend is not a parent or the person in loco parentis of the child, the settlement is not effective unless approved by the parent or other person responsible for the child. Md. Code Ann., Cts. & Jud. Proc. §6-405.
The funds recovered by the minor are protected. It is the state’s public policy that any substantial sum of money paid to a minor because of a claim, action, or judgment in tort should be preserved for the minor’s benefit. Md. Code Ann., Est. & Trusts § 13-402.
A minor is defined as a person who is under 18 and who either lived in the United States at the time of the accident or lives in the United States at the time of receiving the money for a tort claim. Md. Code Ann., Est. & Trusts § 13-401.
If a minor recovers more than $5,000, the payment by a responsible person has to be made either to the court-appointed guardian for the minor, or a check needs to be issued to the order of the trustee for the minor. Md. Code Ann., Est. & Trusts § 13-403. The trustee then needs to deposit that check either in a financial institution chartered and supervised under the state or federal laws, or invest that money in general obligations of the United States, Maryland or its subdivisions, or invest it in an open-end management investment company that needs to meet specified requirements aimed at ensuring that those investments are sound and non-speculative. Md. Code Ann., Est. & Trusts § 13-404.
Except upon the order of a circuit court, the financial institution keeping the proceeds for the benefit of the minor may not allow the withdrawal of any of the money except to pay it to the minor when he or she reaches age 18 or to pay to the personal representative of his estate if the minor dies before reaching age 18. Md. Code Ann., Est. & Trusts § 13-405.
The trustee has to petition the court in the county where the money is on deposit for any withdrawal of money from that trust account. If money is desired for any purpose other than to pay for medical expenses of the minor, or to further the education of the minor, including reasonable expenditures for room and board, the court shall require a strong showing of necessity by the trustee in a hearing. Md. Code Ann., Est. & Trusts § 13-406.
Gorkhmaz M. Asgarov, Esq
is an Attorney & Counselor at Law with Greenblatt & Veliev, LLC, which is a litigation law firm based in Rockville, Maryland that provides services to individuals for personal injury, workers’ compensation, and criminal and traffic defense cases.