How Are Minor Settlements Handled in South Carolina?

Minor settlements in South Carolina are handled in three tiers based on the net amount the child actually receives after attorney fees and expenses. Settlements under $2,500 need no court approval. Settlements between $2,500 and $25,000 must be approved by either circuit court or probate court. Anything above $25,000 must go to circuit court. On top of that, any settlement over $10,000 requires a conservator, and the funds usually go into a restricted account the child cannot touch until turning 18.¹²

When Court Approval Is Required

The threshold that matters is the “claim” amount, defined as the net figure the child receives once fees and litigation costs come out. Three tiers apply:

Under $2,500. No court approval, no conservator. A parent or guardian can accept the settlement directly on the child’s behalf.¹
$2,500 to $25,000. Approval by either the circuit court or the probate court in the county where the child lives or where the lawsuit is pending.¹
Over $25,000. Only the circuit court can approve, and the petition must include a written statement that the proposed settlement is in the child’s best interests.¹

Filing the Petition

Someone must file a verified petition with the appropriate court. The petitioner is either a conservator already appointed for the child, or a parent, guardian, or guardian ad litem if no conservator is in place.¹

The petition lays out the facts of the claim, explains why the amount is fair, and describes how the money will be distributed, including attorney fees and expenses. For claims over $25,000, the best-interests statement is required.¹

Supporting documents are usually expected. Medical records show the severity of the injury. Expert reports or financial projections help justify the settlement figure, especially when long-term care or future treatment is at issue. If the settlement is structured, annuity terms and payment schedules go in the petition. The judge can also require testimony at the hearing.

Attorney fees receive close attention. The fee arrangement must be disclosed, and the judge decides whether the legal costs leave the child with a fair recovery. A fee that looks routine in a standard personal injury case may be rejected if it takes too much of a modest recovery for a child.

The Guardian ad Litem’s Role

South Carolina defines a guardian ad litem in a minor settlement case as someone appointed under Rule 17 of the South Carolina Rules of Civil Procedure, not through the broader guardianship provisions of the probate code.¹ The guardian ad litem represents the child’s interests independently, insulating that voice from any conflict a parent-plaintiff or a family’s own financial pressures might create.

The guardian ad litem reviews the medical records, examines the financial terms, and evaluates whether the amount fairly compensates the child. A report goes to the court with findings and a recommendation. If the terms are inadequate or the proposed fund management is weak, the guardian ad litem can object and recommend changes. Judges weigh this report heavily.

A separate rule requires the court to appoint an attorney as guardian ad litem in any case involving a proposed transfer of a minor’s structured settlement payment rights.³

Conservator Appointment and the Restricted Account

When the net settlement is more than $10,000, the probate court must appoint a conservator to manage the money.² The conservator is a fiduciary and must handle the funds for the child’s benefit alone. It is usually a parent, but the court can appoint someone else when circumstances call for it.

Every conservator must post a bond guaranteeing faithful performance, and the bond amount generally matches the value of the funds being managed.⁴ As a practical alternative, the court can permit the conservator to deposit the settlement into a restricted account at a financial institution instead. That agreement locks the money down: no withdrawals happen without a certified court order.⁵

The restrictions are strict. No ATM or debit cards. No links to other accounts, except a court-approved operating account for recurring expenses. Every withdrawal requires a certified court order stating the exact amount and purpose.⁵ The financial institution reports to the court annually on the balance and status.

One exception is worth knowing. When a structured settlement is worth more than $10,000 in total but the child will not receive more than $10,000 per year during their minority, a conservator appointment is generally unnecessary. The same is true for structured settlements where the child receives no payments until after reaching adulthood.⁶

Protecting SSI and Medicaid Eligibility

This is where families make the most expensive mistake. If the child receives Supplemental Security Income or Medicaid, a settlement dropped into a regular account can push countable resources above the $2,000 SSI limit and trigger an immediate loss of benefits, including Medicaid coverage in many cases.

A first-party special needs trust can solve this. Federal law allows a trust to hold the child’s own settlement funds without counting them as resources for SSI, as long as it meets specific requirements: the child must be under 65 and disabled; the trust must be established by the individual, a parent, a grandparent, a legal guardian, or a court; and it must provide that any balance remaining at the beneficiary’s death repays the state Medicaid program.⁷ The trust must also be for the sole benefit of the disabled child during their lifetime.

In South Carolina, the probate court has authority to establish special needs trusts for disabled minors under Section 62-5-432. Because South Carolina taxes trust earnings, the trust will owe state tax on interest, dividends, and capital gains. Trust payments that cover housing costs like rent or utilities still reduce the child’s SSI benefit. Coordination between the settlement attorney, the conservator, and a benefits specialist is essential.

Federal Tax Treatment

Most personal injury settlements for minors are not taxable. Federal law excludes from gross income damages received on account of physical injuries or physical sickness, whether paid as a lump sum or through periodic payments.⁸ The exclusion covers compensatory damages, including reimbursement for medical bills, pain and suffering, and lost future earning capacity tied to a physical injury.

Punitive damages are taxable as ordinary income, even when awarded alongside a physical injury claim.⁹ One narrow carve-out: if a wrongful death is involved and South Carolina law provided only punitive damages as the available remedy, those punitive damages may be excludable. Damages for emotional distress not tied to a physical injury are taxable, though any portion reimbursing actual medical treatment for that distress remains tax-free.⁸

What Happens When the Child Turns 18

A conservatorship that exists only because of the child’s age ends when the child turns 18, but it does not dissolve on its own. The conservator files a petition to terminate along with a final accounting that details every dollar received, spent, and remaining.¹⁰

That final accounting must cover the full period the conservatorship was active and list all remaining assets and their locations.¹¹ Once the court reviews and approves, it issues an order releasing the funds. The conservator and the now-adult child take that order to the financial institution to close the restricted account. The child signs a receipt confirming they received the assets, and that receipt must be filed with the court within ten days to close the case.

After paying outstanding administration costs and court-approved claims, the conservator distributes the remaining funds to the former minor as soon as practical.¹² Two situations delay release at 18: a separate protective order because the individual is incapacitated for reasons other than age, or another protective proceeding still pending.

Ongoing Oversight and Modifications

Court approval does not end the court’s involvement. The conservator must file annual reports with the probate court showing receipts, disbursements, and current asset balances.¹¹ The financial institution holding a restricted account also reports annually to confirm the account exists and to verify the balance.⁵

If circumstances change, the guardian or conservator can petition for a modification. Unforeseen medical expenses, educational needs, or other significant developments can justify early access to restricted funds. The petition must explain the requested change and include supporting documentation such as updated medical records or cost estimates. The court decides whether granting access serves the child’s best interests, and may require expert testimony before ruling.

1
South Carolina Legislature. South Carolina Code Title 62, Chapter 5 – Section 62-5-433
2
South Carolina Judicial Branch. Revised Minor Settlement Procedure
3
South Carolina Legislature. South Carolina Code 15-50-80
4
South Carolina Legislature. South Carolina Code 62-5-409 – Bond
5
Greenville County. Restricted Account Agreement Form
6
South Carolina Judicial Branch. Revised Minor Settlement Procedure
7
Social Security Administration. Exceptions to Counting Trusts Established on or After January 1, 2000
8
Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness
9
Internal Revenue Service. Tax Implications of Settlements and Judgments
10
South Carolina Legislature. South Carolina Code Title 62, Chapter 5 – Section 62-5-428
11
South Carolina Legislature. South Carolina Code Title 62, Chapter 5 – Section 62-5-416
12
South Carolina Legislature. South Carolina Code Title 62, Chapter 5 – Section 62-5-423