Personal Injury Trust solicitors

A Personal Injury Trust is a legally binding arrangement which holds the funds from a personal injury award for a beneficiary. It allows a beneficiary to retain their entitlement to means tested State benefits without having to take their personal injury compensation award into account.

The Trust ring-fences the money from outside influences and opportunists and is therefore particularly beneficial where there is a vulnerable beneficiary.

Once the Trust is set up it provides flexibility and ease of use so that the Trustees simply agree amongst themselves as to what items need to be paid for from the Trust Fund before arranging payment.

Where professional Trustees are involved the beneficiary will have the advantage of having access to other specialist advisors who have a proven track record in working with such Trusts and which will provide a beneficiary with the support needed throughout their lifetime.

 

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Why would I need a Personal Injury Trust?

Your eligibility for certain assessed government benefits can be affected as a result of a legal claim for compensation or on receipt of an insurance policy payout for personal injury. These state benefits could include:

  • Income support
  • Jobseekers allowance
  • Employment support allowance
  • Housing benefit

A general rule is that if the total amount of personal injury compensation received exceeds £6,000 then your benefits will be affected. If the personal injury compensation amount is over £16,000 then you are at risk of losing your benefits entirely.

As your compensation is often to help cover lost earnings or to aid adaptation to your new circumstances and injuries, it is important that your ability to receive benefits is also protected. To help safeguard you and your future, it is possible to place your compensation money in a Personal Injury Trust.

Personal Injury Trusts keep your compensation safe, whilst allowing you to remain entitled to your means-tested state benefits.

How do Personal Injury Trusts work?

A Personal Injury Trust is an arrangement through which Trustees “hold” a personal injury award for you so that you retain your benefit entitlement. Trustees are chosen by you to look after your assets and act in your best interests. They are often a partner or a parent but can be a solicitor

Trustees hold your assets for you, and you can call for them whenever you wish. They are responsible for managing the money on your behalf by ensuring the money is invested and distributed according to the rules of the Trust.

There is no minimum number of Trustees but we recommend you choose at least two. We do not recommend that you are a Trustee of your own Trust. However you will have power to remove and appoint new Trustees and to end the Trust at any time you feel is necessary.

How can Boyes Turner help?

Our Personal Injury Trust specialists provide services including:

  • Advising on the formalities of setting up a Trust
  • Drafting all Trust documentation
  • Setting up a Trust bank account
  • Arranging for an independent financial advisor to liaise with you and your Trustees
  • Preparing the investment policy statement
  • Completing tax returns
  • Preparing annual Trust accounts

Boyes Turner is here to help, not only with the creation of the Trust but to advise and support you throughout the ongoing process.

 

Personal Injury Trust claim FAQs

We understand how many questions you might have it you are considering a Personal Injury Trust so we have compiled a list of frequently asked questions below as an introduction.

Q. Who should set up a Personal Injury Trust?

A. Anyone who is in receipt of means tested State benefits or who may receive means tested State benefits in the future should set up a Personal Injury Trust.

Q. What would happen to my capital if I did not set up a Personal Injury Trust and received means tested State benefits?

A. The first £6,000 of your capital will be disregarded.  Any capital between £6,000 to £16,000 will be treated as generating a ‘tariff income’ of £1 per week for every £250,000 and means tested State benefits would be reduced by the corresponding amount.

Any capital in excess of £16,000 will disentitle a beneficiary to means tested State benefits.

For those over pensionable age it is the first £10,000 of capital that is disregarded. Entitlement to means tested State benefits takes into account not only the beneficiary’s income and capital and that of their partner (if they have one). It is not affected by any capital their children have.

Q. At what stage should I set up a Personal Injury Trust?

A. You should set up a Personal Injury Trust within 52 weeks of receiving the first interim payment of your personal injury award but if you are not on means tested State benefits then you can set up a Personal Injury Trust at any stage, assuming that you have not combined the funds from the award with any other money.

Q. What happens if I decide to just spend my personal injury award rather than place it in a Trust?

A. If you have spent your award within the 52 week period or brought it below the £6,000 mentioned earlier then you do not necessarily need to set up a Personal Injury Trust. However you have to be careful that you only spend your money on things that the authorities who administer your benefits deem reasonable and if they are unreasonable then you could be accused of ‘deprivation of capital’ and a ‘notional capital’ will apply which effectively means that you are deemed as still having the money even if you had spent it and this would affect your benefits.

For example it may be considered unreasonable if a claimant simply gives the money away to family members, although if you have formal Loan Agreement then this would probably be deemed reasonable. Repaying formal debts such as credit card balances, mortgage, rent, Council Tax or utility arrears would also not be an issue and these items could be paid immediately without being seen as depriving yourself of capital. It would also be acceptable to buy a new car, although it would be a car in your usual price range. Similarly, buying a property that you are to live in would not be an issue but the capital value of a second property would be included in the capital calculation when assessing your State benefit entitlement.

Q. What is a Trustee?

A. A Trustee is a person who you trust and they would be the person appointed to look after your personal injury award. They would be responsible for keeping all records, paying any necessary tax and dealing with the investments related to your Personal Injury Trust.

Q. How many Trustees should I have?

A. We recommend that you have at least two Trustees as a minimum of two Trustees are required to hold land. We do not recommend that the beneficiary is also a Trustee as this can provide complications at a later stage should the non-beneficiary trustee die.

Q. Who can be a Trustee?

A. A Trustee can be anyone over the age of 18 such as family and friends and they should not be bankrupt or have a criminal record. With larger Trusts we recommend that a professional Trustee, such as a solicitor, is appointed. Within the Trusts that we prepare we always include a clause which allows the beneficiary to appoint and retire Trustees as they wish.

Q. Why use a Professional Trustee?

A. We are a specialist team who have been setting up and running personal injury trusts for compensation awards for years. As well as being qualified solicitors Boyes Turner are also full accredited members of the Society of Tax and Estate Practitioners.

We are able to give impartial advice and have contacts with many other professionals such as financial advisors, fund managers and therapists so that we can offer a comprehensive and holistic service to fully support the needs of a beneficiary. Furthermore we are happy to negotiate rates with other professionals so that we obtain the most competitive fees for our clients. Our Trusts consist of more modest trusts to large multi-million pound trusts but in each case the client receives a personal and professional service.

Q. How can a Trust Fund be invested?

A. When acting as professional Trustees we always take advice from independent advisors and arrange for investments to be held in the Trustees name, alongside a Trust bank account, so that the income from the investments can then be transferred into the Trust bank account.

Q. How can I access the Trust Fund?

A. Usually Trustees can sign the cheques and transfer money from the Trust account to the beneficiary. The beneficiary will need to ensure that their own personal account does not go above £6,000 as once again this would effect their entitlement to means tested State benefits.

Q. Can I pay other money into my Trust bank account?

A. Only the money from a personal injury award can be paid into the Trust bank account or a tax refund which is the result of the investment of funds. Therefore, if you receive an inheritance or win money on the lottery this cannot be paid into a Personal Injury Trust.

Q. How will my Trust be taxed?

A. Many of the Personal Injury Trusts that we prepare are known as ‘bare trusts’. This is one of the more straightforward types of trusts so that Trustees are given the award to hold for the injured beneficiary. The beneficiary can call for funds as and when they are required but the Trustees still have a duty to ensure that the money is being paid for the correct purpose. These sorts of Trusts do not have to be registered with HMRC Inheritance Tax Office and the income and Capital Gains are treated as that of the beneficiary. This means that the beneficiary’s own personal Tax Return should be completed so as to include all of the Trust’s income and Capital Gains. The Trust arrangement is seen as ‘tax neutral’ so that it does not make any difference for tax reasons as to whether the monies are in the Trust or in the beneficiary’s own personal bank account. The Trust income and capital is therefore taxed at the beneficiary’s rate.

Q. What will happen when I die?

A. The Trust Fund will form part of your estate and be distributed in accordance with the terms of your Will. We therefore recommend that you prepare a Will and can provide a quote for this.

Ruth’s expertise in Court of Protection matters is a given...what makes Ruth stand out is her skill in balancing her client’s best interests, applying a high standard of care at all times and liaising with families and care professionals with sensitivity 

Jonathan Fennell, Chartered MCSI

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