- Solicitors For Business
- Solicitors For You
- About Us
- News & Events
Personal Injury Trusts
If you or someone you know has suffered injury resulting in a damages award, it can make sense to set up a Personal Injury Trust in order to preserve your current or future entitlement to means-tested benefits. The professional and approachable team at JMW can provide the advice you need to make sure you make only the right decisions when setting up a trust.
Personal Injury Trusts Explained
A Personal Injury Trust (also referred to as a 'PI Trust', 'Special Needs Trust' or 'Compensation Protection Trust') is a trust that can hold damages that are awarded from any personal injury claim, or claim for injuries caused by:
- An act of negligence by another person
- Medical / clinical negligence
- Industrial disease (for example, as a result of long-term exposure to an occupational hazard such as asbestos in the workplace)
- A criminal act of another person
A significant benefit of setting up a Personal Injury Trust is to protect your, or a member of your household's, entitlement to claim means-tested state benefits.
As soon as the damages are held in a Personal Injury Trust they are administered by your Trustees. You choose who you wish to act as your Trustees. If at any time in the future you wish to change your Trustees, you will have the authority to do so. The Trustees must act in your best interests at all times.
Putting funds received from damages awards into a Personal Injury Trust can bring benefits with regard to your current or future entitlement to means-tested benefits. If monies are not placed into a trust, in certain circumstances means-tested benefits may be stopped, forcing you to use your damages award to supplement your income until the damages are used up in this way.
Putting the money into a trust can mean that you are still entitled to means-tested benefits and the capital monies in the trust cannot be taken into account by the benefits agency.
How Will My Eligibility to Claim Means-Tested Benefits Be Affected?
The following thresholds apply to eligibility to means-tested state benefits:
- If you hold capital in your own account(s) or in a joint account(s) with another above a value of £16,000, you will not be eligible to claim means-tested benefits until your capital drops below this threshold
- If you hold capital between £6,000 and £16,000, your entitlement to means-tested benefits will be restricted on a sliding scale
- If you hold under £6,000, you will have full entitlement to means-tested benefits
It is possible that on receipt of your personal injury settlement (or on receipt of an interim payment during the course of the litigation) you will hold over £16,000. As a result, you would lose your entitlement to means-tested benefits.
However, if you were to hold your settlement within a Personal Injury Trust, the funds (both capital and income) become disregarded for the purpose of the financial assessment and as such will not affect your entitlement to means-tested benefits.
Will I Still Be Able to Work?
Ultimately, your ability to work will be determined by the severity of your injury and its impact on you. If you are able to achieve management of your condition that allows you to continue in the job you had before the accident, then of course, there is no reason for you to stop working. However, fibromyalgia is a complex disease and it may be that you are only able to do a proportion of the work you were doing before the accident, or that you require a different job, or even that you are not able to manage to work.
If you are able to stay in work but require additional support or for your role to be modified, your employer must make adjustments so you can continue in your role comfortably - if your employer fails to do so, or treats you differently, this could be classed as discrimination, something that our team will be able to advise you on dealing with.
When should I set up a Personal Injury Trust?
We would advise that you should consider setting up a Personal Injury Trust at the earliest opportunity. This is typically at the point that the first interim payment is made (if applicable) from the claim, or at the point of final settlement. Your personal injury, clinical negligence or industrial disease solicitor should advise you when to consider setting up a Personal Injury Trust.
From the date in which the very first payment is made, whether this is an interim payment or final settlement, you will have a statutory 'period of disregard' of 52 weeks in which to make a decision as to whether to set up a Personal Injury Trust. During this period any payments received are disregarded for the purpose of assessment for means-tested benefits. On the expiration of the 52-week period, the balance of the payment will be included in the assessment and you will lose entitlement to means-tested benefits if you hold over £16,000.
Can I Transfer Any Other Funds Into a Personal Injury Trust?
No. The only funds that can be held in a Personal Injury Trust are those that derive from a claim for personal injury. It is also important to note that if you hold part of your settlement in your own account (for example, during the 52-week period of disregard) you must ensure that the funds do not become mixed by non-personal injury funds if it is your intention to set up or transfer the funds to a Personal Injury Trust at a later date. We therefore recommend that you set up a Personal Injury Trust at the earliest opportunity.
Is Setting up a Personal Injury Trust Always Appropriate?
Not necessarily. Whether or not it is appropriate to set up a Personal Injury Trust is very much dependant on your own, and your family's circumstances.
Our solicitors will only advise for you to set up a Personal Injury Trust if it is appropriate for you to do so in consideration to your financial circumstances and intentions for the funds going forward.
If setting up a Personal Injury Trust is not appropriate, our solicitors will advise of the best course of action.
Where necessary, we will put you in touch with an appropriate independent financial advisor to offer and discuss any financial guidance that you require.
I Am Not in Receipt of Means-Tested Benefits, Should I Still Consider Setting up a Personal Injury Trust?
Yes. If you are not currently eligible to claim means-tested benefits, a Personal Injury Trust can still provide the following benefits:
- It will give you the opportunity to claim means-tested benefits if you later became entitled due to a change in your circumstances (for example, if you became unemployed)
- It will protect / disregard the funds should you later require residential / nursing care for which you are financially assessed by the Local Authority
- If mental capacity should become an issue - possibly as a result of the personal injury - your Trustees can continue to use the funds for your benefit. Alternatively, you should consider setting up a Lasting Power of Attorney
- It is possible that a trust may give some protection against divorce or bankruptcy. If this is a concern you should seek advice. It may be appropriate to consider a pre or postnuptial agreement
- Your Trustees can provide assistance with the management of large sums of money
I Would Like to Set up a Personal Injury Trust, What Else Do I Need to Think About?
Once you have decided to set up a Personal Injury Trust, with the assistance of your solicitor, you will then need to decide on the following:
- Who to appoint as your Trustees. You must appoint a minimum of two and a maximum of four Trustees, all of whom must be over the age of 18. Should you wish, you are able to name yourself as one of the Trustees. Once the trust has been set up, the Trustees will then need to open a trust bank account and seek independent financial advice. We can put you in touch with an appropriate independent financial advisor for this purpose.
- The type of trust to be used for your Personal Injury Trust. There are four types of trust to choose from; a Bare Trust, a Life Interest Trust, a Discretionary Trust or a Disabled Person's Trust. The type of trust will very much depend on your circumstances, the tax positions and who you wish to benefit from the trust fund during the life of the trust. Your solicitor will advise of the most appropriate trust to use.
While a fee will be charged to set up a Personal Injury Trust, please consider that a trust of this nature will pay for itself over a relatively short period of time by the retention of your means-tested benefits.
It is also advisable that you consider making a will. Click here to see how we can help you with writing a will.
Why Choose JMW?
JMW's team of sensitive and approachable lawyers are happy to act as professional trustees either alone or alongside you or family members. We work in conjunction with healthcare professionals as well as financial advisors and accountants to ensure your damages award is used in the best possible way for your benefit.