What Happens to a Child’s Personal Injury Settlement Money in Ontario?

In Ontario, a child’s personal injury settlement must be approved by a judge. Unless the court orders another arrangement, the child’s net settlement is paid into court and held for the child, usually until age 18. Parents cannot simply receive or spend the money, although they may apply to access funds for necessary expenses.

Our Ontario child injury lawyers address how the settlement funds will be protected as part of the approval process, including payment into court, structured settlements and access to money before the child reaches adulthood.

The settlement belongs to the injured child. Before it becomes binding, an Ontario judge must approve it under Rule 7.08 of the Rules of Civil Procedure. The court also considers the proposed legal fees, expenses and arrangement for protecting the child’s net recovery.

Why Is the Settlement Money Protected?

The child is the person who was injured and owns the legal. Compensation for pain and suffering, future care, income loss and other personal losses belongs to the child, even if a parent has acted as their litigation guardian.

Litigation guardians instruct the lawyer and can recommend a settlement, but cannot personally receive or spend the child’s money simply because they managed the lawsuit.

Ontario’s court-approval process protects the child in two ways. The judge considers whether the settlement is reasonable, and the settlement order controls how the child’s money will be held or paid.

This is particularly important where the child is very young or the compensation is intended to provide for needs that may continue into adulthood.

The Court Approves More Than the Gross Settlement

Rule 7.08 of Ontario’s Rules of Civil Procedure provides that a settlement made by or on behalf of a person under disability is not binding without approval from a judge. A minor is considered to be a person under disability for this purpose.

It is the Court's task to ensure that the settlement appropriately compensates the child. This means that the Court cannot simply be told that an insurance company agreed to pay a particular amount. The approval materials need to explain the proposed financial result for the child, including:

• the gross settlement;

• any repayment or deduction required by the settlement;

• legal fees, taxes and disbursements;

• why the settlement is appropriate;

• the net amount belonging to the child; and

• how the net settlement will be protected.

Where the lawyer acts under a contingency fee agreement, the proposed fees and related deductions are also presented for approval. The court can consider the work performed, the risks assumed, the complexity of the case, the result achieved and the amount that will remain for the child.

What Is the Child’s Net Settlement?

The gross settlement is the total amount the defendant or insurer has agreed to pay. The net settlement is the amount remaining for the child after the deductions approved by the court. Depending on the claim, those deductions may include legal fees, HST, litigation disbursements and another payment required to resolve the proceeding.

The net recovery is the amount that must be protected for the child. It is not money belonging to the litigation guardian, the parents or the household.

Is the Money Paid Into Court?

Rule 7.09(1.1) of the Rules of Civil Procedure provides that money payable to a minor under an order or settlement must be paid into court unless the court orders otherwise. When considering another arrangement, the court must have regard to specified provisions of the Children’s Law Reform Act governing the receipt and management of a child’s property.

Money paid into court is held by the Accountant of the Superior Court of Justice. Ontario’s Minors’ Funds Program provides information for families whose children have money held by the court.

Payment into court separates the settlement from the parents’ finances. The parents cannot transfer, invest or withdraw court-held money using ordinary parental or banking authority.

Can the Court Approve a Different Arrangement?

Yes. Rule 7.09 does the court to approve an arrangement other than payment into court in scenarios where it is legally appropriate and sufficient protects the child.'s interests.

Depending on the specifics of a case, alternatives could include:

• a structured settlement providing scheduled future payments;

• payment to a court-appointed guardian of the child’s property;

• a trust or another approved arrangement; or

• a combination of a protected lump sum and future payments.

What Is a Structured Settlement for a Child?

Structured settlements use some or all of the settlement funds to provide payments according to a predetermined schedule.

The payments can be designed around the child’s anticipated needs. They might begin at age 18, continue through post-secondary education or provide income over a longer period. A structure can also help fund future treatment, care, housing or reduced earning capacity.

One advantage is that the child does not receive the entire recovery as a single lump sum upon reaching adulthood. The structure can provide financial security over many years.

The trade-off is reduced flexibility. Once the structure is purchased and the settlement is completed, the payment schedule generally cannot be changed merely because the child’s circumstances or preferences later change.

Approval materials prepared by the child's injury lawyer should explain why the proposed structure suits the child and whether enough accessible money will remain for needs that cannot be predicted precisely.

Can Parents Use the Settlement for the Child?

Parents cannot simply withdraw court-held settlement funds because they believe the money would benefit the child. Rule 72.03(10) provides that an order for payment out of money held for a person under disability may be obtained by a motion to a judge. For a minor, the motion is ordinarily made by or on notice to the Children’s Lawyer. If the Public Guardian and Trustee is acting as litigation guardian, the motion is instead made by or on notice to the Public Guardian and Trustee.

Rule 72.03(11) generally requires a motion brought by someone other than the Children’s Lawyer or Public Guardian and Trustee to be supported by an affidavit in Form 72B.

This means that, practically speaking, a parent or guardian seeking access to court-held funds can make a request through Ontario’s Minors’ Funds Program. The request must explain the proposed expense and provide information about the child’s needs and the family’s financial circumstances.

A request may concern treatment, equipment, education or another expense directed specifically to the child. Relevant considerations can include whether:

• the expense is necessary and reasonable;

• it directly benefits the child;

• the parent can reasonably pay it without using the child’s money;

• another funding source is available; and

• enough money will remain for the child’s future.

Can Money Be Released for Treatment or Disability-Related Needs?

Seriously injured children can sometimes require equipment, therapy, accessibility modifications, educational assistance or services that are not fully funded elsewhere.

Those needs can support a request for payment out, but the request must still follow the court process. Supporting material may include estimates, invoices, medical recommendations and evidence explaining why the expense is required.

The long-term purpose of the settlement will also be relevant. Using a substantial portion of the fund during childhood may reduce the money available for future care, income loss or independence in adulthood.

What Happens When the Child Turns 18?

The money is not necessarily deposited into the child’s account automatically on their eighteenth birthday.

Rule 72.03(7) provides that money held in court for a minor may be paid to the former minor after they reach the age of majority. The person must file a written request for payment and an affidavit proving their identity and that they have reached adulthood, using the forms provided by the Accountant.

The money is paid to the now-adult claimant, not to the former litigation guardian.

This can surprise parents who managed the litigation for years. Acting as litigation guardian does not give the parent an ownership interest in the settlement or continuing authority over the funds after the child becomes an adult.

A structured settlement or another court-approved arrangement may provide for payments on a different schedule.

What If the Child Cannot Manage Money at 18?

Turning 18 ends the child’s legal status as a minor, but it does not necessarily mean the person is capable of managing property.

Where a serious pediatric brain injury, developmental disability or another impairment affects financial decision-making, additional legal planning may be required before the funds are released.

Depending on the circumstances, this could involve:

• a continuing trust arrangement;

• the appointment of a guardian of property; or

• another property-management mechanism authorized by law.

Parents do not automatically gain authority to manage an adult child’s money merely because the parent acted as litigation guardian or has provided lifelong care.

Why the Settlement Arrangement Should Be Considered Before Approval

Before seeking approval, the litigation guardian and lawyer should consider:

• expenses likely to arise before age 18;

• treatment or equipment not funded elsewhere;

• education and vocational needs;

• the child’s ability to manage money as an adult;

• whether a lump sum or structured payments are preferable; and

• how much flexibility the child may require later.

Frequently Asked Questions About a Child’s Settlement Money

Can a parent have the settlement paid into their bank account?

Ordinarily, no. The settlement belongs to the child and is generally paid into court unless the judge approves another legally appropriate arrangement.

Can the parents invest the settlement themselves?

Not if the money has been paid into court. The funds are then held by the Accountant of the Superior Court of Justice.

Can legal fees be deducted before the money is paid into court?

The proposed fees, taxes and disbursements are presented as part of the settlement approval. The court order normally identifies the approved deductions and the net amount payable for the child.

Can the child receive some money immediately?

Only if the settlement order authorizes the payment or a judge later orders that money be paid out. Neither the child nor a parent can demand an immediate withdrawal merely because the settlement has been approved.

Can court-held money be used for school or therapy?

A motion can be brought under Rule 72.03(10), supported by the required evidence. The proposed expense and its relationship to the child’s needs must be explained. However, these should not be relied upon.

Does the child automatically receive everything at 18?

No. Rule 72.03(7) requires the former minor to submit a written request and proof of identity and age. A structure or another approved arrangement may also delay or schedule some payments.

Speak With an Ontario Child Injury Lawyer

Settlement approval materials should explain what the child will receive, which deductions are proposed and how the net recovery will be protected.

Foster Injury Law’s Ontario personal injury lawyers represent injured children and their families across the province. We evaluate the child’s present and future losses, negotiate the proposed settlement and prepare the evidence required for judicial approval.

Learn more about how our Ontario child injury lawyers handle serious pediatric injury claims or contact Foster Injury Law for a free consultation.

Written by Lane Foster, Ontario personal injury lawyer.

This article provides general legal information and is not legal advice. The outcome of any specific claim depends on its individual facts.