What is a Personal Injury Trust?

If you receive an award of damages in respect of a personal injury compensation claim you are able to place your award into a Personal Injury Trust. Instead of receiving your award directly into your own bank/building society account a trust is established and your money is held by your chosen trustees on your behalf.

Once the trust is set up, an account is opened by your trustees for your benefit and this is run on the understanding that they look after it in line with your wishes and a set of rules, which are designed to protect you.

Why Do I Need a Personal Injury Trust?

If you receive an award in respect of a personal injury, your future entitlement to certain welfare benefits may be affected. This could mean that your benefit income may be reduced or even stopped if you have a certain amount held in your own account.

Who can be a trustee/s?

As the title suggests they should be people you trust and may include family, friends, a solicitor or a bank. There is no restriction as to who can be your trustees although individual trustees must be over 18 and sane. If you only wish to involve friends or family, it is preferable to have at least two trustees.

What are the responsibilities of my trustees?

Their role is to hold your personal injury award, and administer it for your benefit. Although your trustees hold and have control over your award, they cannot use it as their own personal property or for their own benefit.

What if something happens to my trustees?

If your trustees die or you fall out with one of them or you get divorced or separate, you have the power to replace that trustee with somebody else of your choosing.

Will my chosen trustees’ means tested state benefits be affected?

If they hold something as a trustee, it is not part of their capital and so will not affect any entitlement to their means-tested state benefits.

How do I access my award?

Normal banking facilities including a cheque book are available to the trustees. All trustees will need to sign any cheques issued on your behalf.

How will any payments made to me affect my benefits?

We recommend that you instruct your trustees to pay you irregular amounts at ad-hoc intervals. As long as these capital amounts keep your personal bank account below the lower means tested threshold, your benefits will remain unaffected.

Should you require money to pay for more expensive items or to repay debts, we recommend that you transfer the money via cheque directly to the third party involved, thus by-passing your personal bank account.

When does a Personal Injury Trust need to be set up?

This depends on your personal circumstances now and in the future. If you are in receipt of means-tested state benefits, until your Personal Injury Trust is set up your damages award counts as capital when assessing your entitlement to most means-tested state benefits. This usually includes money held by your solicitor on your behalf.

What happens if my circumstances change in the future?

If at any time you decide you no longer need a Personal Injury Trust, you simply instruct (in writing) your trustee/s to transfer the money to you, which they have to do. The Personal Injury Trust will then cease.

What happens if I die?

The money in your trust would be distributed in accordance with your Will.  If you have not made a Will you may not control who would receive your money in the event of your death. Your estate would be distributed in accordance with a set of rules which may not be your wishes.

Are there any tax implications?

The money held in the Trust will be taxed in exactly the same way as if you hold the money yourself.

Other things you should know: -

The benefits agency will give you a period of 52-weeks from first receipt of an interim or final settlement payment to establish a Personal Injury Trust.

Beyond this 52-week period, if you then deliberately deprive yourself of capital in order to claim or increase your benefit, you are still treated as possessing it. This may include spending money to carry out necessary repairs/alterations to your home, an expensive holiday, paying off debts including family IOUs and making gifts to friends and family.

To download these Frequently Asked Questions in a PDF document,  please click here.

If you want any further information about Personal Injury Trusts please contact us or if you want us to assess the viablity of a Personal Injury Trust  click here for our Personal Injury Trust assessment form