Leslie J. Rosen

Court Approval of Wrongful Death, Minors' and Disabled Persons' Settlements

by Leslie J. Rosen, Attorney at Law

In Illinois, it is well-established that as wards of the court, children and mentally disabled persons are the most vulnerable of our society and are entitled to special protection from the courts. Accordingly, the Appellate Court has decided that no settlement of a minor’s claim is enforceable unless and until there has been approval by the Probate Court. Villalobos v. Cicero School District 99, 362 Ill.App.3d 704, 712 (1st Dist. 2005) (“any settlement of a minor’s claim is unenforceable unless and until there has been approval by the probate court.”). See also Smith v. Smith, 358 Ill.App.3d 790, 793 (4th Dist. 2005) (settlement agreement that mother signed with her own automobile liability insurer on behalf of her minor daughter, who was passenger in vehicle driven by mother and who was injured when vehicle was involved in accident, did not bar daughter’s personal injury claim against mother; there was no indication in record that trial court approved terms of settlement or that it was in daughter’s best interest); Wreglesworth v. Arctco, Inc., 316 Ill.App.3d 1023, 1026-27 (1st Dist. 2000) (“ any settlement of a minor’s claim is unenforceable unless and until there has been approval by the probate court”). Recently, in Glavinskas v. Dawson Nursing Center, Inc., 2008 WL 5246150, No. 1-07-2122 (December 16, 2008) (petition for rehearing pending), the First District of the Appellate Court extended the holding of these cases to matters involving disabled persons. Glavinskas also made it clear that the Probate Court does not have to rubber stamp the Law Division or Municipal District’s order. If there is an impropriety, i.e. failure to pay the liens or inappropriate attorney’s fees, the Probate Division judge may investigate the matter and cause it to be rectified.

Previously, Probate Court approval was not required in Cook County if the net amount of the settlement was less than $10,000.00. See, Procedures Concerning Settlement of Minors’ and Disabled Persons’ Personal Injury and Wrongful Death Cases” established by the Presiding Judges of the Probate Division, Law Division and First Municipal District in March of 2007. The case law has thus effectively changed the judges’ joint memorandum.

Those procedures, a copy of which are attached to this chapter, along with relevant court forms, and local rules (See Rules of the Circuit Court of Cook County 6.4, 6.5 and 12.15) provide detailed instructions for finalizing settlements brought on behalf of minors and disabled persons and claims brought under the Wrongful Death Act (740 ILCS 180/0.01 et seq.). These procedures apply even if you are able to settle a claim without filing a lawsuit.

Minors’ Settlements

Assuming you have filed a complaint in the Circuit Court of Cook County, through the parent and next friend of a minor, and have agreed to a settlement of the claim, the Law Division or Municipal District judge will rule on the fairness and reasonableness of the proposed settlement, fix the attorneys’ fees and expenses attributable to the litigation, adjudicate liens, find the degree of dependency where appropriate and determine the net amount available to the minor. This is not the end of it, however. The judge’s order of distribution must also state as follows:

The settlement amount approved herein shall be paid only to a guardian appointed by the probate division where the minor or disable person resides and this order shall be effective only after the entry in the probate division or circuit court of an order approving the bond or other security required to administer the settlement and distribution provided for in this order.

A copy of the order the court expects to see is appended to the judges’ joint memorandum.

This is what you need to do to finalize the matter after the Law Division or Municipal Division Judge approves it.

1. Have a guardian of the minor’s person and estate appointed. A petition for this purpose may be found at the Clerk of the Circuit Court’s web site (www.cookcountyclerkofcourt.org) and it is clearly titled “Petition for Guardian of Minor” (CCP 0393.) (All forms are available on the Clerk’s web site and you may type on them and print them directly.) Typically, if the settlement proceeds do not exceed $250,000.00, the parent may be appointed guardian of the minor’s estate. If the settlement proceeds exceed this amount, you will need to have a bank appointed. (Some of the outlying banks, i.e. Devon Bank, will accept estates valued at less than $250,000.00.) Notice must be given to all of the minor’s spouse (if one exists), the parents and adult brothers and sisters of the minor, the nearest “adult kindred.” (755 ILCS 5/11-11.) If the minor is 14 years old or older, the minor may nominate a guardian. (755 ILCS 5/11/5(c). Further rules regarding who may act as a guardian are at Section 11-3 of the Probate Act. (755 ILCS 5/11-3).

2. If the parent is to be appointed guardian of the estate, you will need to have the parent bonded because the parent will have access to the settlement funds and the court will require a bond to protect the assets. The parent must sign a form titled “Oath and Bond of Representative - Surety” (CCP 0312). Once you have that signed form, you can take it to the 12th floor of the Daley Center and ask any of the bondsmen to issue you a bond. The court requires the bond to be 1½ times the amount of the settlement proceeds. Significantly, the court will calculate that amount without regard to the attorney’s fees and costs, but it will include the amount of the liens that are outstanding. If you have obtained a settlement exceeding $250,000.00 you must find a bank with a trust department, to manage the money. Otherwise, the parent’s bond will exceed any fees charged by the bank. There are numerous banks that perform this work and generally, clients like to interview the bankers to determine whether they feel confident with the institution and comfortable working with the trust officers. If a bank is to be the guardian of the minor’s estate, no bond is required. Instead, the banker will sign a form titled “Acceptance of Office” (CCP 0308). I believe that parents should be vigorously discouraged from serving as co-guardians of minors’ estates. Parents often slow down the bank’s ability to make timely investments. Moreover, if a parent is a co-guardian, and the bank’s investment strategy is improvident, the parent has no recourse against the bank, as he or she had agreed to the improvident investment.

3. Assuming that the parent is going to be appointed guardian of the minor’s person, the parent will need to sign an “Oath and Bond of Representative - No Surety” (CCP 0313).

4. Next, you must prepare a “Petition to Settle Cause of Action - Minor’s Estate” (CCP 0395). This form requires you to attach the order from the Law Division or Municipal Department as well as your Statement of Settlement.

5. Finally, you must prepare the “Order to Settle Cause of Action - Minor’s Estate” (CP 0396) You will notice that this Order sets a date for the guardian to be discharged and the surety to be released upon presentation of Vouchers. “Vouchers” are simply receipts. You will need to obtain one from everyone who gets any proceeds from the settlement and you will present them to the court. As for the money that is deposited in the bank, provide a letter from the bank indicating the amount deposited and the facts regarding the title of the account and when the money is to be distributed to the minor. Note: If the minor is receiving public benefits, i.e. Medicaid or SSI, you must advise the client that such benefits will be lost as long as there are funds in the guardianship estate. Accordingly settlement proceeds for such a minor should be placed in an OBRA ‘93 Special Needs Payback Trust. These proceeds must be placed in such the trust directly, and never given to the guardianship estate. Drafting these trusts requires a probate specialist and I strongly urge you to contact one before finalizing any settlement for a minor who is receiving such benefits or who is unable to obtain health insurance benefits. This advice also applies in cases involving disabled persons.

Disabled Persons

In situations involving adults who have suffered serious injuries as a result of an accident or malpractice, guardians of the person have been appointed before you filed the personal injury action. Many times, guardians of the estate have also been appointed as well, and the Inventories filed in those cases reflect that the disabled person has a pending cause of action. As with minors’ estates, the Law Division or Municipal District judge will rule on the fairness and reasonableness of the proposed settlement, fix the attorneys’ fees and expenses attributable to the litigation, adjudicate liens, find the degree of dependency where appropriate and determine the net amount available to the disabled person. Again, the judge’s order of distribution must also state as follows:

The settlement amount approved herein shall be paid only to a guardian appointed by the probate division where the minor or disable person resides and this order shall be effective only after the entry in the probate division or circuit court of an order approving the bond or other security required to administer the settlement and distribution provided for in this order.

The steps that follow are virtually identical to the steps stated above.

1. If a guardian of the estate was not appointed prior to the filing of the personal injury action, or if a successor estate guardian is required due to a significant settlement award that requires professional management, you must prepare a “Petition for Appointment of Guardian for Disabled Person” (CCP 0200).

2. If the parent is going to be the guardian of the estate, the parent must be bonded, as described above. If a bank is going to serve as guardian, then you will need the Acceptance of Office, also as described above.

3. Next, you will need a “Petition to Settle Cause of Action” but there is no separate form for disabled persons, so use the “Petition to Settle Cause of Action - Minor’s Estate” (CCP0395) and cross-out the words “Minor’s Estate.”

4. Similarly, you will need to prepare an “Order to Settle Cause of Action” but there is no special order for a disabled person so you will use the one for Minor’s Estates (CP 0396) and cross-out the words “Minor’s Estate.”

Note: Recently, the Probate Division judges have begun scrutinizing structured settlements more carefully in cases where no significant sums are allocated to the guardianship estate until the minor turns 18 or the disabled person turns 30. This is so because instances have arisen where supporting parents or other care givers have lost their jobs, or otherwise lost their ability to support the injured individual and the parents turn to the guardianship estate for help. Accordingly, I recommend that some money is allocated to the guardianship estate upon approval of the settlement. If there is an OBRA ‘93 Special Needs Payback Trust, the structured settlement must be approved by the Attorney General’s Office and the trust must contain language regarding the continued payment under the structured settlement upon of the death of the minor or disabled person, until all Public Aid liens are satisfied. This, of course, requires a probate specialist.

Wrongful Death Wrongful death actions are creatures of statute and they are brought by a personal representative for the benefit of the decedent’s spouse and next-of-kin. (740 ILCS 180/0.01 et seq.). Recovery from wrongful death actions are not assets of a decedent’s estate. If however, the action includes a survival claim, the settlement for that aspect of the case must be included in a decedent’s estate.

If the decedent has no assets that require the opening of a decedent’s estate, you will have obtained an order appointing a special administrator to prosecute the wrongful death action (735 ILCS 5/13-209). If the decedent has other assets, presumably a decedent’s estate has been opened and your wrongful death action will have been prosecuted by the representative appointed by the Probate Court.

As the attached Procedures detail, and as with actions regarding minors and disabled persons, the Law Division or Municipal District judge rules on the fairness and reasonableness of the proposed settlement, fix the attorneys’ fees and expenses attributable to the litigation, adjudicate liens, find the degree of dependency where appropriate and determine the net amount available to the spouse and next-of-kin.

For proceeds going to a minor, the lawyer must have a guardian of the person and estate appointed, as detailed above, and then present a “Petition to Settle Cause of Action - Wrongful Death” (CCP 0353) and an “Order for Leave to Settle Cause of Action - Wrongful Death” (CCP 0354). The issues that exist regarding public benefits and structured settlements apply here as well, and if the situation becomes complicated, hire a probate specialist to draft an OBRA ‘93 Special Needs Payback Trust.