Establishing a personal injury trust (PIT) where capacity to establish a trust is absentJun 30th, 2021
Ensuring that our clients maintain their current and future entitlement to means-tested benefits following settlement of a personal injury claim is the starting point for our clients post-settlement (if not before). If they have the capacity to manage their own affairs, a PIT is established so that the award is ‘in Trust’; if they lack the capacity to manage their financial affairs, the award is disregarded as it falls ‘under the Order of the Court’.
Far from being a loophole, the statutory rules and regulations go out of their way to allow this to happen, where the capital derives from a claim in respect of personal injury.
However, I was recently instructed in a case involving a Claimant who was to be awarded significant damages where the circumstances led to a financial quandary.
As a result of the injuries the Claimant suffered in the accident, she lacked the capacity to manage her own affairs, including being able to establish a PIT. This would usually mean that her affairs would be managed under the Court of Protection. However, there was a registered Lasting Power of Attorney (LPA) appointing her mother and father to act as Attorneys in such circumstances.
As the Claimant already had an active LPA, the award could not be managed under a Deputyship. Furthermore, the Claimant’s Attorneys could not settle the award into a PIT either, as their administrative powers under the LPA were too limited to allow this.
Therefore, without the protection afforded by the award being ‘in Trust’ or ‘under Order of the Court’, the Claimant stood to lose her entitlement to statutory support, which was vital to maintain the standard of care she needed and quality of life she deserved.
As a solution to this problem, PFP devised the ‘Attorneys Personal Injury Trust’ (APIT).
In essence, the APIT is a bare trust arrangement whereby the Claimant, by her Attorneys, is the sole beneficiary, and the Attorneys must be the Trustees.
Under the terms of the APIT, as the Trustees’ powers are limited to those conferred upon them as Attorneys under the LPA, the role of the OPG and the Attorneys’ obligations to it are not diluted or diminished in any way.
The capital held within the APIT can only ever be applied for the benefit of the Claimant and only then in a manner consistent with the terms of the LPA, thereby resulting in no significant practical difference between funds held inside the APIT and those held outside of it.
Crucially though, the award is regarded as being held ‘in Trust’ and therefore benefits from the same means-testing disregards that it would under a conventional PIT; thereby helping to safeguard the Claimant’s financial position both now and in the future.
The terms of the Trust were approved by the High Court at the time of the Approval Hearing for the award itself.
We consider this to be an excellent outcome for the Claimant, as it secures the future statutory financial support she deserves to be entitled to.