What is a Personal Injury Trust and why would you need one?
A Personal Injury Trust is a legal arrangement that holds compensation funds separately from personal assets, ensuring they are not counted toward means-tested benefits (e.g., Universal Credit, care funding). The Trust is created when you sign a document called a ‘trust deed’ and its purpose is to protect compensation from being considered for means-testing when assessing eligibility for benefits or local authority care funding.
If you receive compensation through a Personal Injury claim, even an interim payment, it may mean that you aren’t eligible for means-tested benefits and stop any payments you are currently receiving. This, however, is why we can help you to create a trust to hold your compensation so you can continue to receive your benefits.
Do I need a Personal Injury Trust?
There is a 12-month grace period that starts from the first payment in relation to your claim (even if that is only received by your solicitor). You should take advice as soon as any payment is received (no matter how small). We do not recommend relying on the 12-month grace period.
When the 12-month grace period is over, the balance of that money is considered when assessing your benefits.
Your compensation may cost you more than you think if you do not put a trust in place. It may cut into your entitled benefits (if any) and your ability to claim them in the future. Not having entitlement to means tested benefits can also stop you from being able to obtain other valuable services being on benefits offers, such as, free prescriptions.
Even if you do not receive any government means tested benefits now, you may need to consider whether you could need them in the future and/ or to protect your compensation from the growing cost of long term care.
What can I do with the money in the trust?
Your normal day to day living expenses are supposed to be met by means tested benefits. That is essential living costs such as gas, water, electricity and food as well as, council tax, rent or any costs for care in residential living. This should usually continue to be met by your benefits, as that should help you to budget properly for your lifestyle. But if there is a shortfall, the trust can cover the excess expenses (if there was an unexpectedly large bill).
There are other types of lifestyle payments that aren’t supposed to be covered by your benefits, such as, your phone bill, TV costs and the cost of extra care. These costs should be met from the money in the trust. The Personal Injury Trust should be able to cover these extra payments alongside potentially helping to buy a new place to live, a new car, fuel and holidays etc. The money you do not need imminently can then be invested by the trustees for a longer period of time.
Who should I choose to be my trustees?
When opening a Personal Injury Trust, you need to pick at least two trustees to look after your compensation. The trustees are able to advise on making decisions regarding any payments that are going to come out of the trust. You can choose anyone you feel secure with having access to your investment such as a friend or close family member. Sometimes, a professional trustee is appointed (e.g. a lawyer or accountant) and this is something we are able to offer to you as well. You can be a trustee, but you really should have an additional two trustees.
Your trustees will have complete control of the trusts assets, there is a lot of responsibility that comes with acting as a trustee and therefore it is imperative to make the right choice when appointing people to it as they have a duty to act in your best interest.
If you have any questions or would like to enquire about creating a Personal Injury Trust, email enquiriuies@sydneymitchell.co.uk or phone 0121 746 3300.
