Court of protection
What is a personal injury trust?
When someone has received substantial compensation following a personal injury (PI) claim, a personal injury trust (PI Trust) may be the best way to protect it. Setting up a PI Trust - also known as a compensation protection trust or special needs trust – means that personal injury compensation can be paid into a trust bank account and won’t be taken into account when means-tested benefits are being assessed. A valid trust will require at least two people to act as trustees, one of which can be yourself.
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Why set up a PI trust?
In many cases, a PI trust will be used for the protection and benefit of someone who has been injured in a serious accident, such as an road traffic accident or an accident at work. Where the nature of their injuries means they are unlikely to be able to work again, for the foreseeable future at least, they would usually qualify for a range of means-tested benefits including:
- Housing Benefit
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Child Tax Credit
- Working Tax Credit
- Income Support
However, as all of these benefits are means-tested, winning a substantial amount of personal injury compensation would make the person ineligible to receive benefits until they had spent a large part of their compensation payment.
For example – having £6,000 in a bank account will lead to reduced benefits being paid, and having £16,000 will mean losing benefit entitlements entirely.
Setting up a PI trust and trust bank account means that the personal injury compensation amount is effectively excluded from means testing, enabling it to be preserved for the long-term benefit of the recipient.
It also ensures that they remain eligible for state benefits in the future: which is a worthwhile consideration if they may need to enter a care home or need a carer in their own home at some point in the future.
Who can set up a PI trust?
If the person who has been awarded the compensation is a minor, then their guardian or legal representative may appoint the Trustees.
In either case, the Trustees should be people who are trustworthy and have the individual’s best interests at heart to look after the affairs and care needs of the recipient.
Is there a time limit for setting up a PI trust?
You have 52 weeks to set up a PI trust in order to ensure that any personal injury compensation you receive won’t impact on your ability to receive benefits.
Under what’s known as ‘the one year disregard’, the compensation payment won’t be taken into account under means testing during this 52-week period.
However, even leaving a short gap between the end of one year from receipt of compensation and the setting up of a PI Trust may mean that your benefits are affected.
Therefore if you are considering setting up a PI Trust, we recommend that you take legal advice as early as possible during the ‘one year disregard’ period to make sure that your PI Trust is in place well within the time limit.
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