Personal Injury Trusts

What is a Personal Injury Trust?

A Personal Injury Trust is a way to manage the new capital you have received following an award of compensation as the result of a personal injury, medical negligence or other successful litigation, and still be able to receive State means tested benefits.

Compensation can arise from accidental injuries, criminal injuries, clinical and other medical negligence causing injury, and compensation given for any other disease or injury caused as a result of employment.

Anyone who is to receive compensation for a personal injury should consider having a Pearson Hinchliffe solicitor set up a compensation protection trust. This is because in many instances personal injury claimants are in receipt of means tested benefits, or may be in the future. 

For those who receive means tested benefits, without a Personal Injury Trust those benefits may be affected when your damages are awarded. At Pearson Hinchliffe Solicitors we consider it our duty to provide appropriate advice to claimants on the option to set up a Personal Injury Trust in order to protect their financial circumstances.

However, advice does not only need to be given if a person is currently receiving means tested benefits. You may not currently be in receipt of benefits but might have access to them at some point in the future, if your “assessable capital” for means testing purposes is low enough. 

In particular, it is important to remember that long term care provision, either at home or in a care home, is a means tested benefit. An injured client may be more likely than others to have need of support in the future.

How Else Can a Personal Injury Trust Help Me?

There are also other advantages of personal injury trusts for example:

• Clients may have limited experience of handling a large sum of money
• They may want protection again grasping relatives
• They may have unstable mental conditions which render the use of trustees helpful
• They may just want to get on with their lives without having to concern themselves with the financial administration
• They may fear the impact of divorce and separation on their finance and want to try and ring-fence their resources in some way

The award may have been negotiated or mediated and it is not necessary for a Court Order to make an award in order to facilitate a Personal Injury Trust unless the person is either a minor or mentally incapable of managing their own affairs. In those cases either the High Court or the Court of Protection will need to agree to the foundation of a Personal Injury Trust.

If the amount of compensation exceeds the ‘nil rate band’ (which is £325,000 for the 2009/10 tax year), Inheritance Tax may be payable if the compensation is placed into a discretionary trust. Specialist legal advice is therefore needed before a Personal Injury Trust is created.

The Department for Work and Pensions and Local Authority means testing rules are very helpful to the compensated person, but usually only if the option of a Personal Injury Trust is taken. 

A Personal Injury Trust can be coupled with personalised investment advice from our own Independent Financial Advisers (IFAs).

For free no obligation information on Personal Injury Trusts, or to speak to a Pearson Hinchliffe solicitor about handling a litigation award, please use any one of the contact methods provided below.