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Protecting your right to means tested benefits when awarded damages for a personal injury claim

Published on 12 March 2021 | Modified on 14 December 2022

Written by Stacey Bennett

What is a Personal Injury Trust?

It is a way of making sure that you and your partner keep the right to means-tested State Benefits following receipt of your personal injury compensation.

Why do I need a Personal Injury Trust?

There are strict limits controlling the amount of savings or income you can receive and still retain your benefits.  Without a Personal Injury Trust you run the risk of being worse off because you received a compensation award.

What can be done with the money in my Trust?

Just about anything, providing the appropriate framework is put in place. The Trustees of your Personal Injury Trust can pay for services or benefits provided for you. Such payments can be care costs, therapy, house purchase, holidays, a car, travel, housing costs, Council Tax or food.

If you are entitled to Local Authority Support, it is possible to top up any care services you are receiving as the trust is treated as a third party. In essence, it is possible to spend your Trust money on virtually anything and Personal Financial Planning can provide specific advice on how this can be achieved.

What are Trustees?

Trustees look after your compensation award once it has been placed in a Personal Injury Trust.  They are chosen by you to act on your behalf and have a wide range of investment powers.

Who can be a Trustee?

The choice is yours but it is recommended that you choose at least two Trustees, usually yourself, a close family member or a Solicitor.

What do Trustees do?

Trustees look after your compensation award and invest it on your behalf.  They also decide if and when to pay out money to you or for your benefit.  Although they can take account of your wishes they are not bound by your requests.  They must act in your best interests.

How do Trustees invest my money?

They should take investment advice from an Independent Financial Adviser chosen by you.

What if I change my mind?

The Trust Deed can be revoked at any time and the damages returned to your direct control.  All you have to do is write formally to the Trustees requesting this.  However, you will then run the original pre-Trust risk of losing your benefits.

Can new Trustees be appointed and removed?

Yes, they can.  The power to do so is in your hands.  For example, Trustees have to act by a majority decision – if there is a stalemate, you can appoint a new Trustee, who will have the casting vote, or you can remove them and appoint another in their place.

How much will it cost me?

  • A professional Trustee, such as a Solicitor if appointed, will charge for their services.  These can be agreed in advance.
  • For the creation of the Trust a suitable independent financial advisor charge a one-off fee.
  • Where appropriate the advisor can also advise on the investment of the funds held in your Trust.

Is it worthwhile?

You need to take into account how much you and your Partner presently receive in benefits each year and compare this figure to the costs set out above. Although there is a cost to establish a Trust, you should consider your options carefully as you may save money in the long run.

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