Blocked Accounts vs. Structured Settlements for a Child in Alabama

By the FigureMyTax Editorial Team · How we calculate

Alabama's guardianship act lets a court direct how a minor's money is held, including deposits, annuities and trusts, and the child generally takes control at 19.

The court decides how the money is held

Under Ala. Code 26-2A-137(a), the court, without appointing a conservator, may authorize, direct or ratify a transaction needed to achieve a security, service or care arrangement, including payment, delivery, deposit or retention of funds; entry into an annuity contract or a deposit contract; or addition to or establishment of a suitable trust. Section 26-2A-136 gives the court the powers over a minor's estate that are necessary for the minor's best interest.

A blocked (restricted) account

In a blocked account the money is deposited under a court order and cannot be withdrawn without further approval. A lawyer's summary says the court may put the settlement funds in an interest-bearing account until the minor reaches 19, and that amounts over $5,000 are generally paid to the court. The advantages are simplicity and access to the full balance at 19; the cost is that interest rates, not guaranteed payments, drive growth.

A structured settlement

A structured settlement uses an annuity the court has approved to pay the child on a schedule, for example lump sums at set ages. The statute authorizes the court to approve entry into an annuity contract. The trade-off is predictability and protection from spending the whole amount at once, against less flexibility if the child's needs change.

A conservator

If a conservator is appointed, 26-2A-152(b) lets the conservator invest and reinvest the estate's funds as a trustee would without court authorization, while other acts need prior court approval. The conservatorship ends when the child reaches 19.

Using the money before 19

The statutory facility-of-payment rule says funds received for a minor must be applied to health, support, education or maintenance, and the balance preserved. A guide on Alabama minors' compromises says the proceeds cannot be used by the minor before the age of majority unless the court allows it; ask the judge how withdrawals work in your order.

Questions to put to the judge

Ask how the interest or payments are taxed, who can withdraw, what happens at 19, and what the fees are. Then use the Alabama minor's settlement calculator to see how much is left after fees. For why approval is needed at all, read why a judge must approve it.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Alabama's rules apply to your specific case with a licensed Alabama attorney.