Telephone Icon

020 7650 1200

Personal injury trusts

Contact our specialist personal injury trust team for expert advice

If you have received, or are due to receive, money to compensate you for personal injury you have suffered, it is recommended that you consider setting up a personal injury trust for the compensation. The compensation could have resulted from a medical negligence claim, criminal injury, accident at work or compensation for industrial disease, to name a few examples.

If you are in receipt of government benefits, you are under a duty to declare your compensation award to the benefits agency as a change in your circumstances. Who you tell depends on which benefits you receive.

If you receive means tested benefits e.g Universal Credit, Housing Benefit or Income Support (not an exhaustive list), your personal injury compensation is excluded from your capital for benefits eligibility calculations but only for 52 weeks. The 52 weeks starts running from the date the first personal injury payment is received; please be aware that this means the date received by your solicitor and includes interim payments, not just the final settlement.

One of the benefits of setting up a personal injury trust is to ringfence your compensation from affecting your means tested benefits. If you are likely to have compensation left at the end of the 52 weeks, and still be relying on means tested benefits (or might be in future), you should consider a personal injury trust otherwise you are at risk of your benefits being stopped.

Other benefits to putting the compensation into a personal injury trust are:

  • To ringfence the funds from being included as capital for local authority eligibility to pay care fees;
  • If you are inexperienced with money and would like some guidance and structure;
  • If you are worried you might overspend and ‘waste’ your money, and would like some structure and safety mechanisms to prevent this happening;
  • To prevent others from accessing your money e.g if you have family members or friends who may view your compensation as a ‘windfall’ and request money from you;
  • If there is a possibility that you might get divorced in future, a personal injury trust may ringfence the funds from being counted as your asset in divorce proceedings;
  • If you aren’t in receipt of means tested benefits now but might need to claim in future, before the funds are spent;
  • If you are acting as litigation friend for a child or an adult who is unable to manage their own financial affairs due to mental incapacity, and who is going to be awarded personal injury compensation, a personal injury trust could be an option to hold the compensation as an alternative to a Deputyship. Specialist advice in these situations should always be obtained.

Personal injury trusts FAQs

Everybody receiving compensation for personal injury should give consideration to putting the money into a Personal Injury Trust. You may decide that one isn’t required perhaps because it is a small award, or perhaps you are likely to have spent the compensation within 52 weeks or none of the above scenarios apply.

It is worth noting that when in receipt of means tested benefits, you should check the capital amount that you are allowed as even a low amount of compensation left at the end of 52 weeks can affect eligibility e.g to be eligible to receive Universal Credit, for example, you should have £16,000 or less in money, savings and investments.

It is also worth noting that whilst there is a 52 week period whilst the compensation is disregarded from means testing, it doesn’t necessarily mean you have 52 weeks to go wild and spend it all. If you are on means tested benefits, theoretically the benefits agency could look at your spending over this period to check you haven’t been ‘intentionally depriving yourself of the funds’ in order to continue to receive means tested benefits. The general rule is that spending should be ‘reasonable to your circumstances’ and not frivolous, which includes giving large sums away.

If you are unsure about setting up a personal injury trust, please bear in mind that there is no time limit on setting one up, although means tested benefits can be affected if the Trust is set up after the 52 week disregard period. Best practice is to keep the funds separate from your own funds so that if you do wish to put the funds into a Trust in future, they can be clearly identified as compensation money.

A trust is a legally binding arrangement for holding assets and is created by a legal document called a trust deed. A Personal Injury Trust deed details the legal formalities to hold and manage funds received for personal injury. You will need to appoint at least two trustees who will hold your trust fund separate to your own money and use it for your benefit.

If the person receiving a personal injury award is a child or adult who lacks mental capacity to manage their own finances, and a personal injury trust is an option, an application to the High Court and/or Court of Protection needs to be made for approval by the Court. In these cases, depending on the value, it is also likely that a professional trustee will be recommended. Amy Chater, partner and specialist in Court of Protection (Financial) would be happy to advise and can act as professional trustee, usually alongside a family member, in these circumstances. You should be aware that there will be ongoing trust administration charges for a professional trustee.

There are no rules on what the trust fund can be spent on however the trustees are managing the funds and all trustees need to agree unanimously that the proposed spending is for you and in your benefit.

If you are in receipt of means tested benefits there are however some considerations to take into account. Your benefits are supposed to cover your day-to-day expenses e.g utilities, food and ordinary clothing, leaving your personal injury trust money to cover other ‘out of the ordinary’ items. For ease of tracing, it is recommended that spending is direct from the trust account. Here are some examples of things you are able to pay for:

  • Your own valid debts
  • Medical care and expenses
  • Property (ideally held in the name of the trust)
  • Home improvements, adaptations and maintenance
  • Personal possessions e.g car, equipment

Next steps

If you would like advice on a personal injury trust from Leigh Day please contact Amy Chater on 020 7650 1269.  Amy will provide specific advice to your circumstances as to whether a trust is recommended and if so what type of trust, who can and should be a trustee, trustees’ roles and responsibilities, setting up a trust account, any tax/other considerations in addition to drafting of the trust deed. The cost is usually £650 plus VAT but depends on the type of trust, the value and complexity. In some circumstances the cost can be claimed back from the defendant as part of your legal claim. If a professional trustee is likely to be required and/or a Court of Protection or High Court application, further advice on costs will be provided.

This is a brief overview about personal injury trusts and should not be relied upon as a replacement for specific advice; it is recommended that you take advice on your own compensation award in the context of your personal financial circumstances. You are not restricted to obtaining this advice from Leigh Day.