Personal Injury CompensationTrusts
This describes the situation where people get compensation for a personal injury and the money is received as a lump sum. This can cause problems that a trust can help to solve.
There is further information about Personal Injury matters elsewhere on our website. But a common problem occurs for people where they are on some kind of means-tested benefits. Suddenly receiving a lump sum of money can mean your benefits are stopped until you have used the money. The capital value of any award of personal injury compensation you receive will be taken into account when calculating your entitlement to those benefits. Even a small award of compensation could affect your benefits entitlement.
Personal Injury Trust
There is a way around this, called a Personal Injury Trust. Not only should it mean you can have use of your claim monies, but it also means that you might be able to protect the monies from future problems. A Personal Injury Trust may also help to prevent your compensation being taken into account in divorce proceedings, and can also be used to protect your award from being taken into account for the cost of current or future long-term care. Placing your compensation award into a Personal Injury Trust will enable the capital to be disregarded when your contribution to care costs are considered.
Even if you do not currently receive benefits, setting up a trust when you receive your award can prevent loss of any future benefits if your circumstances change.
How does it work?
You create a Personal Injury Trust by asking other people, or a company, to hold assets on your behalf. These people are known as 'Trustees'. You decide who you appoint as your trustees. You should have at least two trustees, who must be at least 18 years old, should not be bankrupt, and should not have been convicted of an offence involving dishonesty. You can even act as a trustee yourself if you like, although this is not recommended, and you can even give yourself the power to add or remove trustees at any time.
You can also appoint professional people, such as solicitors, to act as trustees. In the majority of cases the trust will end on your death and the remaining assets will be part of your estate and pass under the terms of your Will, but this is not always the case.
When to do it
In order to avoid any loss of benefits, a Personal Injury Trust should be set up before you receive your award of compensation. However, a Personal Injury Trust can be set up at any time. There is a period of 52 weeks, from the date you receive your award, in which your compensation will be treated as disregarded capital, but this period is subject to special rules so don’t rely upon this.
If you want to know more about setting up a Personal Injury Trust, then please get in touch.