A Personal Injury Trust is a legal arrangement that holds any compensation you receive after suffering a personal injury.

Why should I create a Personal Injury Trust?

There are three main reasons:

1. Protecting your right to receive means-tested benefits.

If you are receiving benefits that are based on how much you earn or how much savings you have, then your compensation could actually result in you losing money. This is because your compensation will be considered ‘savings’ so if it is just paid into your bank account you are likely to have too much money to be entitled to receive your benefits any more. For example, if you are receiving Housing Benefit, this will likely stop when you receive your compensation, so you would end up having to spend your compensation on rent.

By putting your compensation into a Personal Injury Trust, you are still perfectly entitled to keep receiving your benefits, whilst also being able to spend and use your compensation.

2. Protecting your right to receive social care funding.

If you ever need to go into a care home and pay for care fees, unless your compensation has been paid into a Personal Injury Trust, your compensation will be used to pay your care fees.

3. Protecting your compensation from being spent unwisely.

Your compensation is there to help you get on with your life after suffering an injury. Yet when people hear you have received potentially a lot of money, there is the possibility they might expect you to pay for things or even give them some of your compensation. With a Personal Injury Trust however, you can set rules on what the money is spent on, or appoint trusted people to look after the money who you know will make sure the money is only spent looking after you.

What kind of benefits does a Personal Injury Trust protect?

• Universal Credit
• Housing Benefit
• Income Support
• Jobseeker’s Allowance
• Employment and Support Allowance
• Income Support
• Pension Credit
• Child Tax Credit
• Working Tax Credit
• Council Tax Support
• Social Fund

If you are receiving any of these benefits and you are also about to receive compensation for personal injury, it is very likely that a Personal Injury Trust will be able to help you.

How does a Personal Injury Trust protect my compensation?

The key to how a Personal Injury Trust works is that your money is not held directly by you – it is held by your Trust. It therefore doesn’t matter how much money you have been awarded in compensation, because as long as that money is held by the Trust and not you directly, you are still fully entitled to keep receiving your benefits.

Who looks after my money once I have made a Personal Injury Trust?

When you create a Personal Injury Trust, you choose the people who make all the decisions, such as when to release money to you. These people are known as your ‘Trustees’ and you must chose at least two of them.

Most people choose themselves as a Trustee, and then a family member as the second Trustee. You can have more, but two to four is the usual amount. The main thing is that you trust (the clue is in the name!) your Trustees to carry out your wishes and release money when required and protect it from being spent on things that you don’t really want.

When should I make a Personal Injury Trust?

The simple answer is ‘as soon as possible’ once you know you are going to be receiving compensation.

You have 52 weeks after receiving the first payment of compensation (so this could be an interim payment) where your benefits are not at risk, but this should be seen as a window in which to make a Personal Injury Trust, because once that 52 weeks has expired, any compensation you have in your own name will immediately count against you if you are receiving benefits. It is much less risky to open your Personal Injury Trust as soon as possible, and then it is ready waiting to receive your compensation once it has been awarded to you.

Once it is set up, how does a Personal Injury Trust work in practice?

The first thing you’ll need is a new bank account to hold your compensation. This should be a straightforward current account but must be in the name of your Trust, so something like ‘The J Smith Personal Injury Trust’ would be appropriate. Most banks will require all trustees to sign a form and provide their ID to set up the account.

Once opened, the bank will give you a new sort code and account number so your compensation can be paid into it. Your trustees can then release money as and when you need it. This can be usually done by signing cheques or internet banking, but not usually by card as all trustees are required to approve payments.

If you would like to use your compensation to purchase property or investments, this can be done by simply making payments out of your trust bank account, but it is important to remember that any assets you purchase should be held in the name of your Trust, because if any assets are put in your sole name you risk it counting against you for benefits purposes.

How can Humphries Kirk solicitors help?

Our advisors can help you with all aspects of Personal Injury Trusts, such as:

• advising you which kind of trust is best for you
• drafting all the legal documents for setting up the trust
• helping you with the day to day running of the trust
• advising your Trustees of their responsibilities
• opening the Trust bank account for you
• acting as your Trustees and take on all the responsibility for running the Trust

If you would like to discuss any of the above or want any more information, please do not hesitate to contact us on 01202 437150 or p.stagg@hklaw.uk