Personal Injury Trusts – Back to Basics

When you get your compensation, you will probably just want to get on with your life. As a part of getting on with things you should consider the Personal Injury Trust Service offered by Gregory Abrams Davidson Solicitors.

1. Your compensation need not cut your means-tested benefits. You can have your compensation and retain your means-tested benefits entitlements indefinitely. This is perfectly legal and acceptable to both the Department of Work and Pensions and Local Authorities. The Regulations treat Personal Injury Trusts in a special way so that you can retain entitlement as long as necessary. But the special rules only apply if you decide to ‘opt in’.

2. Your compensation can be protected from the cost of long-term care fees when you get older. Even if you do not get means-tested benefits now this can be of great value to you and your loved ones in the future.

3. Your care at home. Care in your own home, as opposed to in a care home, supplied by a Local Authority, is subject to Local Authority discretions as to what they base charges upon, but they should, in our view, also disregard your award if it is put in a Personal Injury Trust under the ‘Fairer Charges Guidance’. They can choose to take income from the award into account. This is a developing and complex area of the law.

4. Your compensation can be protected for you and your family. Even if some day you cannot look after it yourself you can rest assured your compensation will be looked after properly for you and your loved ones.

If you put your compensation into a Personal Injury Trust you can decide how much you need to spend and upon what. The money you want to save can be invested in the trust for you. We can also provide you with new wills and other protection for you and the family as part of a package deal.

The trust is created by you when you sign a special document called a ‘Trust Deed’. It states who must look after your compensation upon your behalf. The people who look after it are your ‘Trustees’. You can choose them. The Trust Deed also explains how the money is to be invested and otherwise looked after for your benefit. You are often one of the Trustees along with either your spouse / partner, another trusted family member or when the compensation sum is significant, your legal advisers.

1. If you receive compensation, even an interim payment, it will tend to cut your means tested benefits. That is certainly after the 12 months ‘period of grace’ ends and sometimes sooner. The period of grace is based upon complex legal provisions and our advice is that you should not rely upon it. That is especially so,  if like most people, you want to retain some of your award for a ‘rainy day’.

2. Remember that your compensation may cost you more than you think if you do not put a Trust in place. It may cut your present entitlements and also your ability to claim in the future. Not having entitlement to means-tested benefits can also stop you being able to obtain other valuable services such as free prescriptions and school dinners for children.

3. Even if you do not get means-tested benefits right now you might want to protect your compensation from the growing cost of long-term care. This is a big concern for many people. Why miss out when the rules allow you to retain your entitlements if you found a trust? This is long term financial planning for a "rainy day" many years in the future.

1. Your normal expenses of daily living are supposed to be met by means-tested benefits (if applicable).That is things such as gas, water, electricity, food, mortgage interest, council tax, most rents and payments for any residential care. These should usually continue to be met by your benefits (so far as possible) because that will help you budget properly. But if there is a shortfall these bills can be met by the Trust (e.g. if you get an unexpectedly large heating bill).

2. Other things which are not supposed to be met by benefits such as your phone bill, TV costs and the cost of extra care should be met from the Trust. The Trust can also pay for a place to live, a new car, petrol, a holiday and much more. It is really up to you. The money you do not need can be invested by the Trustees for the longer term.

1. You need to pick a couple of Trustees to look after the compensation you put into the Trust and make decisions about payments from the Trust. We suggest you choose a family member and a professional person. We can be Trustees if you wish.

2. Your choice of Trustees is very important. Payments are subject to your consent. Trustees must take proper investment advice. You can have the power to get rid of and appoint new Trustees if you want. In many cases having a professional Trustee is a good idea. The trust can be wound up if necessary although that may trigger loss of benefits.

3. The important point to remember throughout the Trust is that you ultimately control how it is run and by whom. You can, at any time, close the entire Trust down and have all the Trust Funds returned to you.

We offer a cost effective service for establishing the Trust. Charges start from £500 plus VAT. This ‘expense’ is saved almost immediately in the preservation of current means tested benefits and within 4 days should you ever enter a care home.