To get your settlement money when you turn 18, you first need to know how the court ordered it held, because the release process is different for each arrangement. If it’s in a blocked bank account, someone has to file a petition asking the court to authorize a withdrawal. If a guardian or conservator managed the funds, that person files to terminate the guardianship and submits a final accounting before the court releases what’s left to you. If your award was paid into a structured settlement annuity, you don’t unlock anything: the insurance company sends payments on the schedule written into the original agreement, usually starting at or near your 18th birthday.
One thing to check first. In most states, 18 is the age of majority and the moment your funds become legally accessible. Alabama and Nebraska set it at 19, and Mississippi sets it at 21. If your settlement was approved in one of those states, the money stays locked until you reach that state’s threshold.
Figure Out How Your Money Is Held
Before you file anything or call anyone, find the original court order that approved your settlement. Your parent or former guardian should have a copy; if not, the clerk’s office at the court that handled the case can pull one for a small fee. The order will say exactly how the funds were to be managed.
Three arrangements are common. A blocked account is a bank account or CD that no one can withdraw from without a court order. It’s the cheapest option and the one courts use most often for smaller settlements. A guardianship of the estate (sometimes called a conservatorship) or a trust is more common for larger awards; a court-appointed guardian or trustee actively manages the money, keeps records, and files periodic accountings with the court. A structured settlement converts part or all of the award into an annuity that pays out on a set schedule, often with the first payment at 18 and additional payments at later ages like 21 or 25.
Releasing Money From a Blocked Account
Blocked accounts are unlocked by going back to the same court that approved the settlement. The steps are usually these:
- File a petition asking the court to authorize withdrawal. Most courts have standard forms. In some jurisdictions you file as the petitioner yourself now that you’re an adult; in others, the former guardian files to terminate the arrangement.
- Attend a hearing if one is scheduled. Some courts handle these on the papers; others want a brief appearance, depending on local rules and the amount involved.
- Pick up the signed order authorizing release once the judge approves it.
- Take the file-stamped order and your ID to the bank holding the account. After verifying the order and your identity, the bank releases the funds.
Expect at least two to four weeks between filing and getting your money, and sometimes longer. Filing fees run from roughly $20 to over $400 depending on the court. Start the process before you actually need the money.
Ending a Trust or Conservatorship
If a guardian of the estate or conservator handled your settlement, releasing the money means formally ending that arrangement. The guardian files a petition to terminate and submits a final accounting showing every dollar received, spent, and remaining. You may also sign an acknowledgment confirming you want the conservatorship closed and the funds turned over to you.
The court reviews the accounting. If everything checks out, the judge issues an order terminating the guardianship and directing that the remaining funds be released to you as your sole property. After you receive the money, you typically file a receipt with the court confirming you got it, which formally closes the case.
For a trust, read the trust document. Some trusts automatically terminate and distribute all assets when the beneficiary turns 18. Others release funds in stages or leave distributions to the trustee’s discretion. If yours doesn’t automatically end at 18, you may need to petition the court to modify or terminate it.
Starting Structured Settlement Payments
A structured settlement works differently because there is no single pot of money to unlock. An insurance company purchased an annuity that pays you on a predetermined schedule, and your first payment typically arrives automatically around your 18th birthday or on whatever date the settlement agreement specifies.
To make sure payments start on time, call the annuity company or the settlement administrator a few months before your birthday. Confirm they have your current mailing address, your Social Security number, and your bank details if you want direct deposit. Payments sent to an old address or a closed account can take weeks to sort out.
Also understand what a structured settlement doesn’t do: it doesn’t let you request the whole balance at once. The schedule is the schedule.
Documents to Have Ready
Whatever arrangement holds your money, gather these before you start:
- A government-issued photo ID, such as a driver’s license or state ID card. Get one before your 18th birthday if you don’t already have it.
- Your birth certificate, which proves your age if your photo ID doesn’t display your date of birth clearly.
- Your Social Security card or number. Banks and annuity companies need it to transfer funds and to report any interest income to the IRS.
- The original court order approving the settlement.
- The new signed order authorizing release, once you have it.
Some banks and annuity companies also have internal forms of their own. Call ahead and ask what they need so you’re not making a second trip.
Taxes on the Money You Receive
If your settlement compensated you for a physical injury or physical sickness, the settlement itself is not taxable income. Federal law excludes from gross income damages received on account of personal physical injuries or physical sickness, whether paid as a lump sum or as periodic payments.1Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness That covers both the original amount and structured settlement payments, including the growth component built into the annuity.
The exclusion has limits. Punitive damages are almost always taxable. Settlements for emotional distress that didn’t originate from a physical injury are also taxable, except to the extent they reimburse actual medical expenses you haven’t previously deducted.2Internal Revenue Service. Tax Implications of Settlements and Judgments Check how the damages were categorized in your settlement agreement.
Even when the settlement itself is tax-free, any interest, dividends, or investment gains earned while the money sat in a blocked account or trust are taxable. If the funds sat for ten years earning interest, you may owe taxes on that accumulated income. For minors, unearned income above $2,700 may be subject to the “kiddie tax,” which taxes a child’s investment income at the parent’s marginal rate.3Internal Revenue Service. Topic No. 553 – Tax on a Childs Investment and Other Unearned Income The kiddie tax can apply through age 23 for full-time students who don’t earn more than half their own support. If 1099-INT forms were issued each year for interest in your account, that income should have been reported on tax returns. If it wasn’t, amended returns may be needed. A tax professional can sort this out before it becomes a problem.
Check These Before the Money Hits Your Account
A few situations can turn a payout into a problem if you don’t plan ahead.
SSI and Medicaid
If you receive Supplemental Security Income, the individual resource limit is $2,000.4Social Security Administration. Cost-of-Living Adjustment (COLA) Any meaningful settlement payout will push you over that limit and disqualify you from SSI the moment the funds land in your bank account. Medicaid eligibility can be affected too, depending on which category of coverage you’re in and your state’s rules.
A first-party special needs trust is the standard tool for preserving eligibility. It holds settlement funds in a way that doesn’t count toward the SSI resource limit. If you’re a mentally competent adult with a qualifying disability, you can establish one yourself. The trade-off is a Medicaid payback clause: when you die, the state is reimbursed for Medicaid services it paid for you before any remaining trust assets pass to your heirs.
An ABLE account is another option if you have a disability that began before age 46. You can contribute up to $19,000 per year without affecting SSI or Medicaid eligibility, and the funds can be used for qualified disability expenses such as housing, education, and transportation.5Social Security Administration. Spotlight on Achieving a Better Life Experience (ABLE) Accounts An ABLE account won’t hold a large settlement on its own because of the annual cap, but it works well alongside a special needs trust.
If you’re on SSI or Medicaid and expect a payout, talk to a benefits planner or attorney before the funds are released. Once the money is in your personal account, the damage to your eligibility is already done.
College Financial Aid
The FAFSA counts trust funds as a reportable asset, which can reduce your aid package. If your trust was established involuntarily by court order to pay for future expenses like medical care, it may qualify for an exclusion from FAFSA reporting; voluntary restrictions on access don’t count. Once funds are released to you as cash, the full amount counts as your asset, assessed at up to 20 percent when calculating your expected contribution. Timing matters, so coordinate with your school’s financial aid office before you accept the money.
Offers to Buy Your Structured Settlement
If you have a structured settlement, factoring companies will approach you offering cash now in exchange for your future payments. You’ll typically receive 50 to 70 cents on the dollar for the payments you’re giving up.
Federal law imposes a 40 percent excise tax on the factoring discount in any structured settlement sale that isn’t approved by a court.6Office of the Law Revision Counsel. 26 USC 5891 – Structured Settlement Factoring Transactions To avoid that tax, the factoring company has to get a judge to approve the transfer and find that it’s in your best interest. Most states have structured settlement protection acts that add their own requirements, including mandatory disclosures and a waiting period before you sign. Courts scrutinize these transfers closely when the payee just turned 18, and a judge will ask why you need the lump sum and whether you’ve had independent financial advice.
If the Money Isn’t All There
Sometimes the release process turns up a gap between what the guardian reported and what’s actually in the account. Poor investments, inappropriate spending, or outright theft do happen.
Start by requesting every court filing related to your settlement, including all accountings the guardian submitted. Compare those against the real bank and investment statements. Discrepancies are your evidence. You can petition the court to hold the guardian accountable for losses caused by mismanagement or breach of fiduciary duty, and you can also pursue a civil lawsuit against the guardian personally. In many states, the statute of limitations on these claims doesn’t begin running until you turn 18 and discover (or should have discovered) the problem, but deadlines vary and the clock is running. If the numbers don’t add up, talk to an attorney quickly.