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Would A Personal Injury Claim Affect The Benefits I Am Receiving?

Suffering a personal injury can be traumatic in many ways, having far-reaching consequences beyond the obvious pain of your injury. Not only will you be affected by the physical pain of your trauma, the long-term implications can often have a knock-on impact on your health and lifestyle.

This could mean that you may need to rely on state benefits, perhaps for your reduced income or for the disability you have gained as a result of your accident.

Will a compensation claim affect my benefits?

If you have over £6,000 (but under £16,000), you are still entitled to means tested benefits but not at the full rate. Total exclusion from means tested benefits only occurs if capital exceeds £16,000.

For certain means-tested benefits, the Government will consider your income, savings and capital assets before deciding whether you are eligible to receive them.

If a compensation settlement takes you above a certain threshold, it may have a bearing on the amount of benefits you can claim.

The main means-tested benefits affected by both income and savings include:

  • Universal Credit
  • Pension Credit
  • Tax Credits (Child Tax Credit and Working Tax Credit)
  • Council Tax Support
  • Income-based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Income Support
  • Housing Benefit

How to claim compensation and still be entitled to benefits?

No one should ever be put off making a personal injury claim because they are worried that their access to state benefits would be affected.

In fact, it is probably even more important to seek the compensation you are entitled to when your finances are stretched.

Personal injury compensation is actually ignored by the government for the first 52 weeks after you receive the award (this applies whether it is an interim or final settlement), but the rules are quite strict on how you spend it within that period.

In order to maintain your compensation award beyond this period without affecting your entitlement to certain benefits, we would recommend putting your compensation into a personal injury compensation trust.

Personal Injury Trusts and how they work?

A Personal Injury trust allows someone who has received payment, resulting from an injury, to hold and manage their funds to ensure that it is not taken into account for assessment of means-tested benefits or care contributions.

A trust can also help people who might be vulnerable, young, old or simply unfamiliar with managing such a sum of money. The trust may not be necessary for everyone, however consideration of its advantages and the implications of not using one should always be considered.

It is essential that only funds received for the injury make up the trust funds as ‘mixing’ can render the PI trust ineffective.

Why set up a Personal Injury Trust?

Benefits protection is a common reason for using a PI trust but there are other reasons including care costs, protecting money from third parties (including relatives), and help with managing finances. It may also be the case that although you do not receive benefits now, you may do in the future and if that is likely or possible a trust should be considered.

Time limits for setting up a Personal Injury Trust

Ideally, the trust should be set up before the expiry of the 52 week ‘disregard’ period, but it can be set up at any time subject to the personal injury funds still being available and identifiable. A trust can also be set up before the first payment.

You should also keep in mind that if you set up a trust after the injury funds have been properly taken into account, the DWP will not let you recover ‘lost’ benefits.

Trustees

Usually, anyone who has received a payment for a personal injury can create a PI trust. However, in the case of adults with incapacity someone may need to do this for them, either by having Power of Attorney or a Guardianship order, and the authority of the Office of the Public Guardian will sometimes be sought.

Where the injured party is a child, the child’s parent can often set up a trust for them, although the Court might insist that the Office of the Accountant of Court is involved to ensure the child’s best interests.

Assuming you are capable, you can be a trustee but you should not be a trustee on your own as for most PI trusts this will have the result of making the trust ‘not a trust’. For the same reason, you should avoid two trustees where the chances are that the other trustee may be likely to die before you. Three trustees represent safety in numbers and allow decisions to be made by majority.

Choosing a personal injury solicitor?

We strongly advise working with an expert solicitor when setting up a Personal Injury Trust. If you would like some more advice on personal injury trusts please contact our personal injury experts on 0808 252 5231 and one of the team will be able to assist you. 

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