A personal injury trust is a trust set up by a solicitor utilising monies received as a result of a settlement arising out of a personal injury or clinical negligence claim.
A personal injury trust can also be used for sums of money received from personal accident insurance, charitable gifts or others sources but only if the sum arises as a result of the injury. The money may have been awarded to cover particular purposes such as lost future income or to cover costs of rehabilitation, aids and equipment or household adaptation required as a result of the injury sustained.
The purpose of a personal injury trust is to ensure that the recipient:
- Retains their entitlement to means tested benefits including:
- Housing benefit
- Council tax reduction
- Job seekers Allowance
- Income Support
- Employment and Support Allowance
- Minimises their contributions towards any ‘community care support’ they may have provided by the local authority social services department
Even if a recipient is not receiving such support at the time the award is made it is still sensible to consider setting up such a trust where there is a possibility that in the future their situation may change so that they may look to claim such benefits.
The funds in the trust are only disregarded for the capital means test under legislation if funds are paid into the trust within 52 weeks of receipt. It is important to keep in mind that this 52 week period starts to run from the first payment and so if an interim award is received it is important that the trust is established at that point.
Recipients should not be put off by use of the work ‘Trust’. These can be relatively straightforward to set up and can easily be managed by the recipient, so long as they have capacity, with one or two other trustees. Usually one of those trustees will be a professional trustee so it is important that the costs of setting up and managing the trust are included in any settlement of the claim. This is particularly important with trusts funds with a large amount of compensation money to manage.
It is important that consideration is given to who are the right trustees to manage the funds as they will have full control over the trust and the funds held within it. It is important that the trustees can work well together and act in the best interests of the person for whom the funds are held.
Once the Trust fund has been set up it is recommended generally that it is used to pay directly for capital items required such as aids and equipment, household adaptations, and also care provision, holidays etc. The trustee’s role is to ensure that the money is spent wisely. It is generally best to ensure that the funds are not used for general use because this can lead to mixing of funds which might interfere with means tested benefits – the very issue the trust was set up to avoid.
It is also important that legal advice is sought about the setting up of the Trust particularly where large sums of money are involved and/or the trust is for a child or vulnerable adult who is not capable of making decisions with regard to management of the funds.
Produced by Jenny Shone
Jenny is an associate in the clinical negligence team at Brain Injury Group member law firm Higgs & Sons.
What is the Brain Injury Group?
The Brain Injury Group exists to support individuals and families affected by brain injury and the health and social care professionals working in this specialist field. Our mission is to provide anyone affected by brain injury with access to advice on legal, financial and welfare benefit issues delivered by proven experts in the field who have been chosen not only for their skills and knowledge, but also for their passion and dedication to helping people.
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If you would like advice about bringing a personal injury claim, capacity, deputyships or managing the award of compensation or any other aspect of brain injury welfare, legal or financial advice, we have specialist brain injury solicitors and Court of Protection solicitors who can assist.
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