Personal Injury Trusts
When a person receives an award for compensation, that person’s entitlement to means-tested benefits may be reduced or stopped completely, depending upon the size of the award. You can have your compensation and retain your means-tested benefits only if you set up a special, compensation protection trust to hold the monies.
If you receive means-tested benefits, you can only hold a certain amount of money in your own name. This is known as the ‘capital threshold’. This capital threshold is calculated per household; so if your partner is in receipt of means-tested benefits, your personal injury award may also affect their entitlement.
You must let your local benefits office know about any change in your circumstances. You are allowed 52 weeks in which to spend your compensation. This is known as the “52 week disregard rule”. Your compensation payment will be disregarded when assessing your eligibility for benefits for the period of 52 weeks (which is triggered by the first payment you receive – even if that is only a small, interim payment). On expiry of the 52 weeks your entitlement will then be re-assessed.
Personal Injury compensation awards paid into a trust are disregarded when assessing current or future entitlement to means-tested state benefits. There is no upper limit on the amount that can be placed into a Personal Injury Trust, although the only funds that can be deposited into a Personal Injury Trust are funds derived from a payment made in consequence of a personal injury.
Funds within the trust should also be disregarded when assessing entitlement for residential care and other forms of care, including care provided in your own home (domiciliary care).
You should consider setting up a Personal Injury Trust even if you are not in receipt of means-tested benefits now, as this will protect any future entitlement you may have. Your compensation award may become relevant to future calculations that affect you and your family (e.g. in relation to pension credit to top up your income in retirement and protecting your compensation from the cost of long term care fees when you get older).
When your case settles, our personal injury and clinical negligence team will put you in touch with a member of our Private Client team. We can then advise you in light of your compensation and set up a PI Trust on your behalf.
Below are three case studies of clients we have helped recently in light of their individual circumstances and needs after they achieved a personal injury settlement.
Case Study 1
The Claimant, Mr A, aged 68, was injured as a result of clinical negligence.
He was in receipt of means-tested benefits. Our personal injury lawyers secured a settlement from the Defendant’s insurer for a lump sum of £420,000 with periodical payments.
Mr A was concerned about managing such a large sum of money. He set up a trust. With professional advice from an Independent Financial Advisor he used a large portion of his award to purchase and adapt a bungalow. The balance of the award remains in his trust account and he continues to receive his state benefits.
Case Study 2
Miss, S, aged 25 years old was injured as a result of a road traffic accident. Our personal injury lawyer settled a claim for £115,600 less CRU.
At the time of the settlement, Miss S was not in receipt of means-tested benefits. However, she was concerned about managing such a large sum of money and in particular, the influence her friends and family would have over her spending.
Miss S decided to set up a Personal Injury Trust appointing professional trustees. She therefore secured any future entitlement to state benefits and care, whilst remaining confident in the management of her trust and the advice and support she receives from her professional trustees.
Case Study 3
Mrs R, 44 years of age was injured as a result of an accident at work in 2006. Our personal injury lawyers settled her claim for £30,000.
Mrs R was in receipt of weekly housing benefit and council tax benefit. Mrs R was unsure about setting up a trust as she was worried that she would not be able to access her money easily when she needed it. She considered asking her children to hold the money for her. However, we advised her that this would be seen as a “deliberate deprivation of assets” by the benefits agency and Mrs R would lose her benefits and her compensation.
Without her benefits Mrs R would have needed to make up the shortfall from her compensation and her award would not have lasted long.
By setting up the personal injury trust, Mrs R continued to receive her benefits. As to management - Mrs R still appointed family members as trustees. However, should circumstances change, Mrs R can change her trustees or revoke the trust at any time.
To get in touch with our friendly and helpful team phone 08459 006 007 or use our contact form . For more information click http://www.leoabse.co.uk/private-client-solicitors/trust-advice
