Section 2064. Compromise, Settlement, Discontinuance and Distribution

(a) No action to which an incapacitated person is a party shall be compromised, settled, or discontinued except after approval by the court pursuant to a petition presented by any party in interest.

(b) When a compromise or settlement has been approved by the court, or when a judgment has been entered upon a verdict or by agreement, the court, upon petition by the guardian or the guardian ad litem or any party to the action, shall make an order approving or disapproving any agreement entered into by the guardian or the guardian ad litem for the payment of counsel fees and other expenses out of the fund created by the compromise, settlement or judgment; or the court may make such order as it deems proper fixing counsel fees and other proper expenses. The balance of the fund shall be paid to the guardian of the estate of the incapacitated person qualified to receive the fund, if there is one or one is to be appointed. The balance of the fund payable to the guardian of the estate may include a structured settlement underwritten by a financially responsible entity that assumes responsibility for future payments or a trust as described in subdivision (b)(4) of this rule. If the incapacitated person has no such guardian, and none is to be appointed, the court may order:

(1) an amount not more than twenty-five thousand dollars ($25,000.00) to be paid for the benefit of the incapacitated person to the guardian of the person or to the person or agency by whom the incapacitated person is maintained;

Official Note

The amount payable under subparagraph (1) conforms to the amount set forth in Section 5101 of the Probate, Estates and Fiduciaries Code, 20 Pa.C.S. § 5101, relating to when a guardian in unnecessary, incorporated by reference into Section 5505 of the Code, 20 Pa.C.S. § 5505.

(2) any amount in cash of a resident or non-resident incapacitated person to be deposited in one or more savings accounts in the name of the incapacitated person in banks, buildings and loan associations, savings and loan associations or credit unions, deposits in which are insured by a Federal governmental agency, provided that the amount deposited in any one such savings institution shall not exceed the amount to which accounts are thus insured, or in one or more accounts in the name of the incapacitated person investing only in securities guaranteed by the United States government or a Federal governmental agency managed by responsible financial institutions. Every such order shall contain a provision that no withdrawal can be made from any such account unless the incapacitated person is adjudicated to have capacity, except as authorized by a prior order of the court. Proof of the deposit shall be promptly filed of record;

Official Note

The order should provide for deposits in more than one savings institution if future accrued interest may reasonably be expected to increase a single deposit beyond the insured limit.

For the definition of savings account, see Rule 76.

The rule contemplates the deposit of money in an account investing in federally guaranteed securities, withdrawals from which may be blocked, and not the direct investment in a particular security.

(3) an agreement be executed providing for a structured settlement underwritten by a financially responsible entity that assumes responsibility for future payments. All moneys paid from the structured settlement during incapacity shall be paid into a restricted account as provided by subdivision (b)(2) of this rule;

(4) a trust agreement be executed with a corporate fiduciary which is independent from the incapacitated person and anyone acting on the incapacitated person’s behalf and is lawfully authorized to engage in trust business in Pennsylvania or the state of the incapacitated person’s domicile, which trust

(i) is designated to receive the fund;

(ii) contains such terms for investment, disbursement and distribution of the fund as the court deems proper; and

(iii) expressly provides that it is subject to the court’s continuing jurisdiction, including the court’s right to modify or terminate, for cause shown, although the trust may be otherwise irrevocable.

Official Note

This rule permits the use of a trust, including a special needs trust.

(c) When a judgment has been entered in favor of an incapacitated plaintiff and no petition has been filed under the provisions of subdivision (b) of this rule, the amount of the judgment or any part thereof shall be paid only to a guardian of the estate of the plaintiff qualified to receive the fund, unless the court, on its own motion or on petition of a person, not a party to the action, representing the interest of the plaintiff, enters an order under subdivision (b) of this rule.

(d) Nothing contained in this rule shall prevent the payment into court of any money by the defendant.

The provisions of this Rule 2064 adopted June 2, 1941, effective February 2, 1942; amended May 17, 1950; amended September 25, 1956, effective forthwith; amended September 1, 1958, effective forthwith; amended, effective July 22, 1970; amended June 23, 1975, effective immediately, 5 Pa.B. 1817; amended June 3, 1994, effective July 1, 1994, 24 Pa.B. 3019; amended October 3, 1996, effective January 1, 1997, 26 Pa.B. 4985. Immediately preceding text appears at serial pages (190565) to (190566).