If you or your child have been awarded compensation for personal injury or medical negligence, you might find that you’re no longer eligible to receive certain means-tested benefits. This is where Personal Injury Trusts have an important role to play.

How they work

When a client is in the process of receiving an interim payment, or has received a final compensation award in a medical negligence claim, it is important that they are advised as to how best to protect and manage their monies.

Failure to place a settlement into an appropriate trust, or with the Court, could adversely impact on the client’s entitlement to means-tested state benefits and/or local authority funded care. This means that their settlement monies could be quickly depleted without being used for the intended purpose, to compensate the claimant for their injuries sustained.

Managing the award

Setting up a trust can be particularly important when dealing with claims on behalf of minors. Where the child will have capacity on reaching 18, a Personal Injury Trust can be set up for their benefit. The Trustees of the Trust, usually including a Professional Trustee, can manage the damages award to maximise it for the child’s benefit later on in life, all whilst removing the damages award from the local authority’s consideration in assessing the client for eligibility to means-tested state benefits, or state funded care.

The Court of Protection

If a child is unlikely to, or will not have capacity to, manage their own affairs on reaching 18, monies can be paid into the Court of Protection, with a Deputy acting on their behalf. There are limited circumstances where Personal Injury Trusts may be set up for claimants who lack capacity, but they will require further Court approval and it will need to be proven that a Trust is in the claimant’s best interests.

Why Personal Injury Trusts are increasingly used

Without a Personal Injury Trust or involvement with the Court of Protection claimants may have their benefits reduced or stopped on receipt of a damages award.

Both options offer protection and flexibility for the monies awarded, however the Court of Protection will only become involved in limited circumstances. When the threshold for Court of Protection involvement is not met, a Personal Injury Trust offers much greater flexibility to the claimant and their Trustees, as it allows for the money, with appropriate advice from independent financial advisors, to be invested.

As with all litigation involving a minor, the settlement of any claim along with any Personal Injury Trust will need to be approved by the Court, but Judges are increasingly willing to approve Personal Injury Trusts for a child when it can be shown that the proposed investments will benefit the child by attracting an advantageous rate of return on the damages award, and where a Professional Trustee will be appointed.

Contact us

If you would like advice on Personal Injury Trusts, call us on 0203 871 9258 or email .

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