If you’ve been awarded compensation for a personal injury, you might find you’re no longer eligible to receive certain means-tested state benefits. This is where Personal Injury Trusts come in.
What are Personal Injury Trusts?
A Personal Injury Trust (PI Trust), also known as a Compensation Protection Trust or Special Needs Trust, allows you to keep your personal injury compensation if you’re claiming means-tested state benefits now or you will be in the future.
These trusts are legally binding arrangements in which funds are held by a person or people known as ‘trustees’. Their terms are set out in a document called a Trust Deed. The trusts are made up exclusively by funds derived from a personal injury compensation payment (or payments), for example compensation received as a result of a road traffic accident or an accident at work.
Means-tested benefits, also known as ‘top-up benefits’, include:
- Housing Benefit
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Child Tax Credit
- Working Tax Credit
- Income Support
These benefits are being gradually being replaced by Universal Credit, which is being introduced to areas across the UK in stages.
Means-tested benefits are paid to people who are unemployed or on a low income, or whose ability to work is restricted due to illness or disability. They’re assessed by your local authority according to the amount of money you have at your disposal.
There are strict rules about how much money you’re allowed to have access to if you’re claiming benefits. If you have more than £6,000 in your bank account, your benefits will reduce. If you have more than £16,000 in your account, you’ll lose your entitlement to benefits altogether.
Under the current rules however, your personal injury compensation is ring-fenced if it’s held within a PI Trust. This trust will ensure that your money is disregarded and not taken into account when a local authority assesses your entitlement to means-tested benefits.
In other words, placing your compensation money in a trust of this kind will ensure you’re still eligible for means-tested benefits now and in the future, including if you undergo a residential care assessment.
Who can set one up?
If you’ve been awarded personal injury or medical negligence compensation, you can set up a trust of this kind. If a child or an adult who lacks capacity has also been awarded personal injury or medical negligence compensation, you’re also able to set up a trust on their behalf as their guardian or legal representative.
When should I set up a PI Trust?
The short answer to this is as soon as possible after you’ve been awarded compensation. Ideally, you should set one up before the compensation payment is received, or shortly afterwards. For the first year following the receipt of compensation, the compensation isn’t taken into account when you’re being assessed for means-tested benefits. It’s important to be aware that this 52-week period starts on the day on which you get the first compensation payment, regardless of whether this is an interim payment or your full award.
If you don’t meet this cut-off point, all is not lost. You can set up a PI Trust at any point. However, there are two main disadvantages associated with delaying. The first is that after the 52-week period has elapsed, any compensation money you have will be taken into account when you’re being assessed for benefits, meaning you may lose money you would otherwise have been entitled to. You can’t claim this money back retrospectively after setting up a PI Trust. The second is that it can become more difficult over time to determine which part of your finances derive specifically from your compensation award.
How do PI Trusts work?
The first step to take if you want to set up a PI trust is to appoint your trustees. These are the people you must choose to manage your money in a PI Trust, and they should therefore be people that you, as the ‘beneficiary’, can trust to look after your money on your behalf.
You should select at least two trustees who must be over 18 years of age. You can act as a trustee yourself, but if you do this, you’ll also need to nominate two others to ensure a total of three trustees.
If you need to access money from your trust, all trustees must first agree to its release. These people are responsible for administering your personal injury compensation money according to your best interests.
Trustees can include your partner, as well as close family members or friends. In high value claims or in cases where children are involved, you may wish to appoint a professional trustee such as a solicitor. Slater and Gordon have extensive experience of working with those who’ve received compensation to manage their funds effectively and to maximise the advantage of their compensation by providing professional advice and support.
It’s important to be aware that to remain eligible for state benefits, you must ensure your compensation is paid into a specially designated trust bank or building society account that’s been set up by your trustees. This account can only ever contain your personal injury compensation money. You can’t add any additional funds to it from other sources.
What are the benefits of setting up a PI Trust?
A PI Trust isn’t only advisable if you’re currently receiving benefits. It’s also recommended if you’re likely to receive benefits at some point in the future.
A PI Trust will protect your entitlement to local authority funding for the costs of living if you think you’re likely to go into a residential care home or require care in your own home later on in life. You may also consider safeguarding your compensation if you’re concerned that you may be taken advantage of financially. A PI Trust can protect your money in the event that you have to go through divorce proceedings too.
In addition, if you’re concerned about your future mental capacity or what might happen to your compensation if, for example, you suffered a brain injury or lost the ability to make your own decisions, by placing your compensation in a PI Trust you ensure that your trustees will look after your affairs and care needs according to your best interests.
You may also wish to consider establishing a trust of this kind is if you lack experience in handling large sums of money, or if you simply want to get on with your life without having to worry about financial administration.
How can Slater and Gordon help?
Our experienced team can enable you to maintain your entitlement to means-tested benefits by creating a PI Trust. We’ll help you to decide whether this type of arrangement is right for you and provide you with detailed information and expert assistance in all aspects of creating and managing a trust, including who to appoint as trustees.
Our specialist solicitors will explain the main provisions of your trust and store the Trust Deed for you. We can also contact your benefits offices to explain why your compensation is disregarded when assessing your entitlement to means-tested benefits. Our Compensation Protection Service can also help you to increase the real value of your compensation.
If you come to us for help, you can rest assured we’ll prepare a PI Trust that’s tailored to meet your precise needs. For more information, don’t hesitate to call us on freephone 0808 175 8000 or contact us online.