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Personal Injury Trusts

HJA specialise in pursuing compensation claims arising as a result of accidents and hospital errors. These actions are known as Personal Injury (PI) claims.

What is a Personal Injury Trust?

A Trust is a formal legal relationship where assets are put under the control of at least two persons (the Trustees) for the benefit of another (the Beneficiary).

A personal injury trust is sometimes referred to as a compensation protection trust and is a trust set up using funds received as compensation for a PI claim. Personal injury includes accidental and criminal injuries and clinical negligence and industrial disease related injuries. The injury can be physical or mental. PI trusts can be set up irrespective of the size of the payment made or where the injury occurred.

A PI trust cannot be set up where the injuries were fatal. Relatives of the injured person can claim compensation for bereavement and loss of financial support but the compensation cannot be placed in a PI trust if the clients have not sustained any direct injury themselves.

Why do I need a Personal Injury Trust?

The primary purpose of a PI trust is to ensure that you can receive or continue to receive means tested benefits and local authority funding. Funds held in a PI trust are disregarded for the purposes of means testing. We can advise as to whether you are in receipt of means tested benefits.

For means tested benefits, the general rule for capital is:

(i) if you have over £6,000 you are at risk of having your benefits reduced, and
(ii) If you have more than £16,000 then you are at risk of losing your benefits entirely.

If you have more than £16,000 you would also lose other associated benefits such as free school lunches and prescriptions.

If your compensation is held in a PI trust, you can continue to claim benefits and you can still have the benefit of the money held in the PI trust rather than see it eaten away by the cost of living.

Therefore a PI trust is extremely useful whether you currently receive benefits or if there is a chance that you may claim means tested benefits in the future.

If you need to go into residential care at some point in the future setting up a PI trust will protect your compensation as you will still be entitled to Local Authority funding for your care home fees.

How does a Personal Injury Trust operate?

Usually you would be appointed as one of the Trustees and you would choose a close relative or friend to act as the other Trustee.

The money in the Trust is to be used for your benefit. When you require funds you would submit a request to the Trustees.

The Trustees are under an obligation to take financial advice to ensure that the money is invested wisely. Your Trustees are also under an obligation to always act in your best interests.

The only money that can be put into the Trust account is your compensation money.

The one year disregard

Any compensation paid in respect of a PI claim is disregarded for the purposes of means testing for a period of one year from the date that the first interim payment was made.

A PI Trust must be set up within a year of the first compensation payment and the process can take a few months so steps should be taken to set up the trust well before the end of the year otherwise there is a danger that your entitlement to benefits could be lost.

It is a good idea to take advice during this period in order to discuss your plans with regard to the compensation and to decide whether a PI trust would be advantageous.

What do I do next?

To set up the Trust you will need a minimum of two people to act as your Trustees. The Trustees must be over the age of 18 years, of sound mind, of good character and have no current or past problems with money. If you are unable to secure another person to act as a Trustee or wish to have a professional Trustee, the partners of Hodge Jones & Allen have experience of acting as Trustees and would be happy to be appointed Trustees.

You will then need to contact our Private Client Team for us to take details from you and draft a Trust Deed which will need to be signed by you and your chosen Trustees.

After the Trust Deed has been signed the Trustees need to open up a bank or building society account in the name of the Trust or Trustees and your compensation award would be paid into this Trust account.

We would also inform the Benefits Agency of the existence of the Trust.

The members of our Private Client Team are friendly, approachable, understanding and experienced. We aim to provide advice which is easy to understand and our clients regularly acclaim the individual and professional service we provide.

Our Personal Injury Trust Solicitors are backed by nearly four decades of experience. Our legal practice and team of court of protection solicitors have a strong track record of achieving favourable client outcomes. For expert legal advice use our contact form or call us on 0808 250 6017 today.