Personal Injury Trusts
Mutual Financial Personal Injury Consultants are experts in setting up Personal Injury Trusts. Our trusts allow you to keep control of capital awarded for personal injury, clinical negligence or industrial diseases, whilst also maintaining eligibility for means tested State benefits.
If a claimant receives means tested benefits or Local Authority Care and Support, it is likely that a Personal Injury Trust will be required. It can be a complicated decision and we will advise whether or not this is something that is needed and if so, will make the necessary arrangements for a Personal Injury Trust to be set up.
Means tested benefits are provided by the Department for Work and Pensions (DWP formerly the DSS) and the Local Authority who often use the same means testing rules when calculating entitlement.
A "means test" is when the DWP or Local Authority considers how much money an individual has when deciding whether to pay benefits. This includes compensation for a personal injury.
Some Means Tested Benefits:
- Employment Support Allowance
- Housing Benefit
- Council Tax Benefit
- Income Support
- Tax Credits
- Local Authority Care & Support
- Free prescriptions
How much money affects benefits?
In most cases, capital of £6,000 and above is the threshold where means tested benefits start to be reduced. Once you have over £16,000 all means tested benefits are typically lost.
When should a Personal Injury Trust be Set Up?
To get the maximum entitlement to benefits, a claimant or their solicitor should talk to us as soon as it is anticipated that capital may be received. This could also be an interim payment.
Who is the beneficial owner of the money?
Think of it like this, the trust owns the capital and claimant "owns" the trust. In reality the beneficial ownership of the capital never changes, it remains completely the property of the individual. In a standard situation the individual and the trust are effectively the same person. In more complex cases we can separate the two but only when that is to the individual's advantage.
What about control over the damages?
The people who control a trust are called the trustees, they are under no obligation to tell anyone else about the trust or reveal any details about it. A Personal Injury Trust holds the compensation. In most cases it is controlled by the claimant and one other person, (usually a spouse, a parent, other close relative or solicitor) who are both classed as trustees. It will normally have its own bank account and the trustees retain complete control over it.
What about Tax?
Where a standard Personal Injury Trust is created, there are no special tax rules that one needs to be aware of. The tax position of the claimant remains exactly the same as it would have been without a trust.
What about investment?
We will arrange to set up a trust bank account for the trustees. The trustees therefore retain complete control over the award. Following that, in most cases, a proportion of the compensation award is invested. This can be to pay for immediate care needs or to grow over the longer term so that future needs can be provided for.
Can damages still be used to buy a house?
Yes absolutely, this is where a Personal Injury Trust can be most effective. Done properly, this can be achieved whilst still maintaining your benefits. If done incorrectly, a worst case scenario would see the Local Authority forcing you to sell your home in the future to pay for the care they provide to you.
