A 'personal injury trust' sounds daunting, but there is no need for it to be. It is a simple mechanism that allows you to keep control of your damages, whilst maintaining your entitlement to benefits such as Employment and Support Allowance, Local Authority Direct Payments and Housing Benefit.
You are likely to have concerns over accessing and controlling your award of compensation if it is held in trust. However, a personal injury trust, when correctly established, gives you all of the control and access you are likely to require to be able to best meet your needs, both now and into the future; protecting your current or future means-tested support in order to maximise your damages.
In its simplest form, your personal injury trust may simply hold a bank account from which the trustees, chosen by you, can administer your funds. It is commonplace for the trustees to be you, the recipient of the award, and a close friend, family member or spouse. With few exceptions, you will be able to spend the funds in any way you, the trustees, choose and reach the same investment conclusions as you would without it.
We provide a comprehensive service and offer guidance and advice in relation to:
- Whether or not a personal injury trust is right for you.
- Providing advice as to whether you are receiving all of the benefits you are entitled to.
- Establishing the personal injury trust in line with your wishes.
- Liaising with your benefits office in relation to your trust and ensuring your entitlements are maintained
- Opening a personal injury trust bank account to hold your damages, at least in the first instance.
- Depositing and investing your award with suitable security.
- Protecting your award for loved ones following your death.
- Considering and recommending alternative actions other than trust establishment (where appropriate).
- Reviewing your position and making amendments in accordance with your changing needs and circumstances.
We will provide you with a free written recommendation without obligation to proceed. It is important to us that you are in a position to make a fully informed decision on how you can best meet your objectives.
Personal injury trust FAQs
Are there any risks to having a personal injury trust?
Holding funds within a personal injury trust adds no additional risk compared with holding those same assets or accounts in your own name. The accounts or investments are held by you, assuming that you have appointed yourself as one of the trustees, and you are the sole beneficiary of the trust fund.
What do I do if I need to change my co-trustee?
Should you need to change your co-trustee for any reason you are able to do so. This could be desirable for a number of reasons such as a relocation, separation/divorce or simply due to having someone closer in your life that it is appropriate to share this responsibility with. There will however be a small administration fee and therefore it is advisable to appoint those who you feel will be able to serve your best interests for an extended period.
What happens to my award of damages held in trust when I die?
On death your trust effectively dissolves and the assets contained within are treated as if they were simply held by you personally. They therefore form part of your estate and get passed in accordance with your Will or the intestacy rules if no Will is in place. It is advisable that you consider establishing a Will that reflects your wishes to ensure that your loved ones receive your estate in the way you wish, particularly if you are not married and wish your partner to benefit from your estate or the intestacy rules do not reflect your wishes.
Are there any ongoing costs or charges?
There are no ongoing costs or charges in relation to administering the trust unless you decide to appoint a professional trustee to handle your affairs.
How does the Benefits Agency know to ignore my trust fund and what do I disclose on any future benefits form should the need arise?
If you are in receipt of means tested support at the time of establishing the personal injury trust, with your authority, we will write to your benefits agency fulfilling your legal obligation to disclose your change of financial circumstances. In doing so we will request that the benefits agency confirm for our records that the Trust is to be disregarded in relation to any financial assessment. Should your circumstances change in future and the need arise to further disclose your financial circumstances we will be on hand to advise you on how best to complete the disclosure
I have heard that personal injury compensation is disregarded for a period of 52 weeks from payment. What do I need to know?
This is correct. Personal injury damages can be disregarded for a period of 52 weeks from the date awarded. However this is not without complication. Firstly, it is necessary for you to claim the 52 week disregard and it is advisable that this is done in writing to fulfil your obligation to notifying of your change in financial circumstances. Furthermore, the 52 week clock starts ticking from the date of the first payment of any made in consequence of the injury. Therefore previous interim payments, insurance payments or even charitable payments made to you as a consequence of your injury will all start the clock. It is therefore possible that this disregard period will have expired prior to receiving any payment from your personal injury claim.
Even if the disregard period is available to you care must be taken. At the end of the disregard period you may be asked to account for how your funds have been used. In the event that your benefits agency considers your expenditure to be extravagant or purposeful to rid yourself of funds to create, maintain or increase any entitlement to you may be caught under the 'deprivation of capital' rules and treated as retaining funds you have spent. This would have the double edged result of reducing your benefit income at a time that you no longer have the capital to support yourself.
I am going to spend my award quickly - why do I need a trust?
Providing the expenditure you intend to make is acceptable to your benefit agency you may not need to establish a trust. In the event that your benefits agency considers your expenditure to be extravagant or purposeful to rid yourself of funds to create, maintain or increase any entitlement you may be caught under the 'deprivation of capital' rules and treated as retaining funds you have spent. If you are in any doubt as to how your expenditure may be assessed you should seek advice either from an adviser or direct from your benefits agency. Alternatively, by placing your award under the protection of a personal injury trust you will be able to choose how to spend your funds however you wish.
I am going to use my award to purchase a property - should I have a trust?
Providing the property is to be your main residence, its value will be disregarded in relation to any means tested state benefits received. However, should you require residential care later in life the property may no longer be ignored in relation to your ability to pay for your care. Whilst for many, the risk of requiring residential care may be many years away, holding the property, which is often their largest single asset, within the trust will protect its value from assessment and secure the option of handing the property down to the next generation or the option of selling and accessing the equity rather than handing it to the Local Authority.
I am not in receipt of any Benefit support - should I consider a personal injury trust?
This will depend on your plans or objectives. If your award of compensation is modest and will be spent in the short-term it is unlikely that a trust will provide you with any benefit although you may wish to discuss your circumstances in order to ensure you make a fully informed decision. However, should you intend to keep your award to meet needs over the medium to long-term it is advisable that it is protected from financial assessment should your circumstances changes. A future need to claim means tested support may be due to an unrelated occurrence such as ill-health or redundancy. A personal injury trust will protect your right to claim the benefits to which you are entitled.
Can I place additional funds into my trust?
Yes, but only if you receive those funds as a result of your injury. This could be in respect of an insurance payout, charitable collection or a voluntary payment from a family member to support you. It is not allowable to place other personal savings or assets which are not connected with your injury into the trust and have these disregarded from financial assessment.
What if I wish to cancel the trust for any reason?
You may do so. However, the trust is drafted with the intention of enabling you to meet any objective you may have. Therefore, it is usually possible to meet your objectives whilst retaining the protection of the trust and consequently it is unusual for beneficiaries to decide to shut down their trust prematurely. If you feel it necessary to close your trust in order to fulfil your objectives we would recommend that you discuss the issue of concern with us as there is usually a simple solution available.
Can I invest the trust fund to target a return on the award capital?
Yes. You may invest in any way you would have invested personally outside of a trust arrangement with few exceptions. Consequently you should be able to benefit from the same or similar level of returns available outside of the trust. The return achieved would belong to your trust and simply increase the capital held within the trust and continue to be disregarded in relation to any entitlement to means tested state benefits.
What if I have any additional questions left unanswered?
We offer general advice and guidance on personal injury trusts without fee or obligation. We would welcome the opportunity of answering any questions or concerns you may have in relation to personal injury trusts and the protection of means tested benefits. Should you wish to discuss your circumstances and whether a personal injury trust is right for you, please do not hesitate to contact us on 01270 759786.