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The roles of the guardian ad litem and structured settlement in a Texas medical malpractice case involving a minor

After a case involving a minor settles, there's some additional work to be done before funding

When there’s a settlement in a Texas medical malpractice case involving only adults, getting the case wrapped up and funded is straightforward. When a minor (or incapacitated person) is a plaintiff in the case, though, there are some additional steps to go through. One is the appointment of a guardian ad litem.

Because minor children can’t bring a lawsuit in their own name or capacity, an adult, usually a relative, files the lawsuit in the capacity of “next friend” of the minor. After a settlement is reached, the parties will file a motion with the court for appointment of a guardian ad litem, an independent attorney appointed by the trial court to represent the interests of the minor.

From a big-picture perspective, the guardian ad litem has the role of making sure that the settlement and the use and distribution of funds are all in the best interest of the minor. Texas law seeks to avoid a situation where a parent or next friend of the minor would misuse funds for their own benefit.

I’ve always enjoyed working closely with the guardians ad litem appointed by trial judges in my cases. A good guardian ad litem will essentially look over the shoulder of the plaintiff’s attorney to review the pleadings, expert reports, and settlement documents. The guardian ad litem will make a call on whether the settlement amount is appropriate and acceptable given the liability and damages issues in the particular medical malpractice case.

Preserving Medicaid qualification

In addition, the guardian ad litem will have a keen interest on making sure that any settlement will not unnecessarily disqualify a minor from eligibility for public services, such as Medicaid or CHIPS. With the high cost of healthcare expenses, it’s easy to understand why it’s important to preserve Medicaid eligibility, when applicable.

Medicaid is the joint federal-state-funded program that provides health care coverage to minors in households that meet certain financial thresholds.

The exact financial standards vary from time to time and depending on the number of household members. Based on some recent research that we conducted for a case, though, in a single-parent household with two children, the Supplemental Security Income linked Medicaid program allows a maximum income of around $3,200 per month. When income is retained over one month, it becomes an asset. The asset limit for the child is $2,000 in countable assets and another $2,000 in countable assets for the parent. There’s a long list of definitions of what’s countable and what isn’t in terms of assets. Two important exclusions include a house and vehicle, with some limits.

The CHIPS program has different financial parameters. There is no asset limit for the parent under the CHIPS program, but the earned income limit is around $3,600 per month.

So, what’s the long and short of these financial requirements? For a minor plaintiff who’s on Medicaid, it’s not possible for the parents (or next friends) to receive any substantial proceeds for their individual claims. Under Texas law, parents have individual claims when their children are seriously injured, including claims for non-economic damages like mental anguish.

 Special needs trust and annuity

In a typical case involving a minor with a profound brain injury or other disabling injury, we will set up a special needs trust after the case settles. When any amount of money is deposited into the special needs trust, it is not considered income or an asset for Supplemental Security Income (SSI) and Medicaid eligibility purposes. The parents can work with the trustee of the special needs trust to obtain funds for expenses related to the injured minor child that aren’t covered by Medicaid.

Additionally, we also normally work with a structured settlement specialist who will recommend annuity options that will pay off either over a set term of years or for the lifetime of the minor child. An annuity is a contract with a financial company. In exchange for an up-front payment, the financial company agrees to make periodic payments for the terms specified in the contract.

An annuity is a form of structured settlement that’s an excellent vehicle to tie in with a special needs trust. Once the trust is set up and funded, we can specify that the annuity payments will go directly into the special needs trust. Doing things this way protects the minor’s SSI and Medicaid eligibility.

Court approval

After the settlement and guardian ad litem appointment, the plaintiffs’ lawyer, parent(s) of the minor, and financial experts work transparently and closely with the guardian ad litem to come up with a distribution and funding plan that’s in the best interest of the minor.

Once the plan is in place to the satisfaction of the guardian ad litem, the next step is to obtain court approval. This is done by scheduling a minor settlement hearing. The plaintiffs’ attorney, parent(s), and guardian ad litem attend the hearing. When possible, the minor often attends the hearing as well.

During the minor settlement hearing, witnesses will be sworn in and the court will hear testimony about the allegations in the case, the proposed settlement, the structured settlement, the trust, and the distribution proposal. The parent(s) will be asked under oath if they believe the settlement is in the best interest of the minor and if they are requesting that the court approve the settlement. These hearings typically end with the trial judge asking if the guardian ad litem agrees. If so, the court approves the settlement and funding can occur.

When choosing a lawyer to handle a complex medical malpractice case involving a minor, experience matters. Contact a skilled, top-rated Houston, Texas medical malpractice lawyer for help in evaluating your potential case.

Robert Painter is an award-winning medical malpractice attorney at Painter Law Firm PLLC, in Houston, Texas. He is a former hospital administrator who represents patients and family members in medical negligence and wrongful death lawsuits all over Texas. Contact him by calling 281-580-8800 or emailing him right now.


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