Right Trust for the Job – Personal Injury Trusts

There are some that think that Trusts are “only for the rich and the wealthy”.

There are others that believe that the answer to any kind of estate planning problem is to “just put [it] into a Trust”.

A Trust is simply an estate planning “tool” and, like with all “tools” it is vital to ensure that the adviser is using “the right tool for the job”. This is true whether a person is considered financially wealthy or not.

In this article, the writer will consider Life Interest Trusts, what they are and how they can be used.

What is a Personal Injury Trust?

When a person suffers a serious injury, they may be entitled to receive compensation or other payments relating to the injury. Our Personal Injury specialists can assist people when making such claims.

Once any payment has been received, the funds then belong to that person as part of their own finances. However, this can pose a problem for people who are in receipt of means tested benefits or are likely to be entitled to such benefits in the future. The payment received may then take their finances over the allowances for those means tested benefits that they are receiving so that they are no longer entitled to them. This may cause a break in their entitlement to those benefits and cause them to rely on their compensation to run out before they can reapply.

To avoid such compensation payments being considered in any means tested benefits assessment and services, the funds can be placed into a Personal Injury Trust. If suitable, this should be created within 52 weeks of receiving the first compensation payment. This could be an interim payment from a personal injury claim or any other payment received via other means relating to the injury suffered.

If a Personal Injury Trust is not created in that initial 52 week period, a Personal Injury Trust can still be created subsequently. However, any funds received, from when the 52 week period ends to the date it is transferred into a Personal Injury Trust, will be included as part of any means test assessment.

The 52-week period allows people to consider what they would like to do with the money received. The funds could be spent in that period which means that by the time the 52 weeks has come to an end, the person is not likely to be over any threshold for their means tested benefits. Alternatively, they may not be able to create such a Trust because they are not physically and/or mentally able to do so and need that time to recover. If the injured person is not able to manage their own affairs then a Court of Protection application may be required to create the Trust and/or to appoint a Deputy to manage their affairs going forward. If such an application is necessary then our Court of Protection specialists can assist.

Also, just because the injured person is not eligible for means tested benefits immediately does not mean that they will never be eligible in the future. A Personal Injury Trust will ringfence the funds received so that they are not taken into account for any such future assessment.

Advice should be considered as to whether such a Personal Injury Trust is suitable and, if so, what form it should take.

Personal Injury Trusts also allow for the funds to be transferred to trusted individuals (the Trustees) to be managed for the benefit of the injured person (the Beneficiary). This enables the funds to be protected for the injured person who may be vulnerable such as young children, elderly or people living with disabilities. The funds received may be substantial and the injured person may not have had experience of managing money of that size before.

What type of Personal Trust is needed will depend on the circumstances (and this list is not exhaustive):

1. A simple “Bare Trust” so the injured person can demand the funds from the Trustees             whenever needed. The Personal Injury Trust is merely a way of keeping the funds separate from the injured person’s own funds
2. A “Vulnerable Person’s Trust” (also known as a Disabled Beneficiary Trust). This is a special type of Trust for tax purposes which maintains the injured person’s entitlement to the funds but also allows minimal payments to other people and can specify where those funds should be paid in the event of the injured person passing away.

Our specialist lawyers can discuss whether a Personal Injury Trust is suitable and, if so, which type of Trust should be used. We can then also discuss who should be appointed as Trustees. The injured person can be appointed, if suitable. However, as with any trust, choosing the right type and who the Trustees are can be crucial.

How Pinney Talfourd Can Help

If any of the above relates to you then you can speak with an adviser at Pinney Talfourd. Our specialists are experienced in the creation of Trusts either during a person’s lifetime or in their Will. We can assist with the creation and registration of the Trust, Trust administration and the winding up of the Trust and assisting with the related reporting requirements