Personal Injury Trusts

• Published date: 23 November 2020
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Personal Injury
• Law Firm: Butcher & Barlow
• Author: Samuel Dale

Sam Dale, Partner and specialist in private client and dispute resolution, explains the benefit of setting up a Personal Injury Trusts following the payment of compensation received as a result of a personal injury claim.

What is a Personal Injury Trust?

A Personal Injury Trust is a legally binding arrangement for holding and managing compensation that an individual has received as a result of an injury.

What are the benefits of a Personal Injury Trust?

The main benefit of a Personal Injury Trust is that any funds held in such a Trust will be disregarded when an individual is assessed for some means tested benefits and when being assessed for the purposes of local authority funded care fees.

For mean tested benefits, if you own assets worth between '6,000 and '16,000, any benefits you claim will be reduced. If you own assets over '16,000 you will not be entitled to means tested benefits.

With regard to local authority care, if your assets are above '23,250 then you will not be entitled to funding to assist with care cost.

The Personal Injury Trust effectively "ring fences" the compensation, ensuring it is excluded from the asset calculations

This therefore avoids a situation where a claimant recovers compensation only to have their benefits terminated, or their future potential entitlement affected, resulting in a claimant being financially worse off than before they received any such compensation.

An additional benefit for individuals who have received a significant compensation settlement is that they may wish to have assistance in managing the sums involved. Appointing a suitable co-trustee can provide that support in making difficult decisions with regard to the use of and investment of the funds.

Do I need to consider a Personal Injury Trust if I am not in receipt of benefits?

There are reasons to consider a Personal Injury Trust even if you are not in receipt of means tested benefits.

Any compensation received may impact the means testing of a household member and, as such, the points detailed in the previous section would still be of relevance.

Whilst you may not be in receipt of any means tested benefits now, your situation may change in the future as a result of a change in employment status or a need to receive local authority care.

What funds can go into a Personal Injury Trust?

The funds must relate to compensation from a personal injury claim, including but not limited to road traffic accidents, accidents at work, slips and trips, criminal...