What is a Personal Injury Trust?

A Personal Injury Trust is a legal arrangement where the compensation you receive from a personal injury claim is placed in a trust and managed on your behalf. This ensures that your compensation does not affect your eligibility for means-tested benefits.

Personal Injury Trusts are governed by various laws and regulations, making it essential to seek expert advice to ensure you maintain access to the benefits you need during your recovery. These trusts can also be beneficial for individuals who are vulnerable, elderly, or inexperienced in managing large sums of money. While not necessary for every personal injury claim, setting up a Personal Injury Trust is often a smart and worthwhile consideration.

Why Set Up a Personal Injury Trust?

There are several key reasons why you might want to consider establishing a Personal Injury Trust:

1. Protecting Your Benefits

One of the most important reasons to create a Personal Injury Trust is to safeguard your entitlement to means-tested benefits. Without a trust, compensation exceeding £16,000 could result in the loss of your benefits. Even compensation between £6,000 and £16,000 can affect your entitlements, reducing your benefits by £1 for every £250 of capital.

2. Safeguarding Your Compensation

In addition to protecting your benefits, a Personal Injury Trust can also:

• Shield your compensation from external claims or influences
• Provide structured management of your compensation funds
• Ensure your award is used appropriately for your ongoing care and needs
• Protect vulnerable beneficiaries

Even if you aren’t currently receiving DWP benefits, you might want to ensure your compensation isn’t used up by future care costs. It’s important to manage your award carefully because the DWP or local authorities could consider certain spending or gifting as “deliberate deprivation of assets,” which might lead to a reduction or suspension of your benefits.

At Greystone Solicitors, our personal injury experts can guide you through the process and help determine if setting up a Personal Injury Trust is right for your situation.

When Should You Set Up a Personal Injury Trust?

Timing is key when setting up a Personal Injury Trust:

• The first payment of your compensation is disregarded by the DWP for 52 weeks.
• After 52 weeks, any unspent compensation could begin to affect your benefits.
• Additional compensation payments are considered immediately and can impact your benefits.

To ensure your trust is in place before your benefits are affected, it’s advisable to set it up before receiving your final award and before the 52-week period ends. You can even establish a trust using an interim payment to get early protection.

Choosing the Right Trustees

Selecting the right trustees to manage your Personal Injury Trust is crucial for its success. Trustees are responsible for overseeing the trust funds and ensuring your compensation is spent according to your needs.

Trustees can be:

• Family members or close friends
• Professional trustees
• A combination of both

When choosing your trustees, consider the following:

• Financial expertise: Trustees should have the ability to manage funds responsibly.
• Availability and reliability: Choose individuals who can dedicate the necessary time to manage the trust effectively.
• Understanding of your needs: Trustees should be familiar with your circumstances and future requirements.
• Professional guidance: While family and friends are often chosen as trustees, professional trustees can offer valuable expertise, ensuring the trust is managed impartially and correctly. Professional trustees are held to higher standards of care, which can help in managing the trust effectively.

How Much Does a Personal Injury Trust Cost?

The cost of setting up a Personal Injury Trust can vary depending on the complexity of your case. Typically, costs include:

• Initial setup fees for the trust
• Registration and reporting to HMRC (if applicable)
• Ongoing administration fees (if applicable)

More complex personal injury claims may result in higher fees due to the additional legal work involved.