When a person suffers an injury caused by someone else’s negligence and secures a compensation award for that injury from those responsible, there are options that should be considered on how the award is managed. It will depend on whether the person who has suffered the injury has capacity to manage their property and financial affairs as to which of the following two options will be most appropriate:

1. A Court of Protection Property and Financial Affairs Deputyship

When a person suffers from a mental impairment, has no lasting power of attorney and has been assessed to lack capacity for their property and affairs by a medical expert, an application will need to be filed with the Court of Protection along with a COP3 Capacity Assessment, seeking the appointment of a financial deputy.

The appointed deputy will be responsible for making decisions regarding the person’s property and affairs, in their best interests. The deputy role can be taken by a lay person such as a family member or it is often the case that a professional deputy is appointed as a reliable and trusted adviser who can provide continuity of support to the person and his or her family. It will depend on the circumstances as to whether a lay person or professional is most appropriate. Generally, those who receive a large settlement will invariably have a professional deputy and the Court of Protection would normally request this over a lay deputy due to the severe injuries and the level of work required to manage the person’s assets. This could include such things as requiring a substantial amount of care, house purchases and adaptations, specialised equipment, management of investments and therapy.

Personal injury lawyers should be advising their client when a professional deputy is needed in view of the complexities of the case. It is of significant importance that the personal injury lawyer includes the deputyship costs within the claim to avoid such costs having to be paid from the monies awarded for other things such as general damages, care and case management etc. The Court of Protection would normally only consider a lay person to act as deputy where the claim is of a smaller amount and does not require much professional expertise.  

2. Setting up a Personal Injury Trust

Where the person has retained capacity, they can place their compensation award into a personal injury trust.  A personal injury trust is a legally binding arrangement for holding and managing funds received as a result of an injury caused by someone else’s negligence, whether that injury be physical or mental. The trust is of a specific type, whereby the injured person can place their compensation within a trust and the monies will be disregarded when a financial assessment is undertaken for means tested benefits and statutory funding.

The personal injury lawyer must ensure they provide expert advice to their client on setting up a personal injury trust, including whether a professional trustee would be most appropriate in the circumstances. Without such advice, there is risk of a future claim being brought by the client due to the loss of thousands of pounds in means-tested benefits.

In cases where the court directs that the award be placed into a personal injury trust, where the client is a minor or otherwise incapable of managing their funds, the costs for setting up and the management of the trust can be claimed for as part of the settlement.

KEY DIFFERENCES

MANAGEMENT

Deputyship

At least one deputy will be appointed by the Court of Protection to make decisions in respect of an incapacitated person’s property and affairs.

The deputy can be a lay person or a professional. It will depend on the circumstance which would be most appropriate and whether there should be more than one person appointed.

If more than one deputy is appointed, they may be appointed as joint deputies or joint and several.

Personal Injury Trust

A minimum of at least two trustees are appointed by way of a trust deed which is executed by a private client lawyer. 

The trustees may be lay people or could be professionals such as a solicitor. If the person benefitting from the trust is age 18 or over, they can appoint their own trustees and may wish to choose a combination of both.

When the person reaches the age of 18, they can become a trustee of the trust.

Where the person is a minor, the court will insist that at least one trustee is a professional trustee. It is usual that the Court will approve the professional trustee acting together with the litigation friend and/or parents as co-trustees.

The trustees will manage the funds held in the personal injury trust in accordance with the terms set out in a trust deed.

COSTS

Deputyship

The costs of a professional deputy can be claimed within the schedule of loss during the litigation proceedings if there has been a mental capacity assessment showing that the person suffering from the injury lacks capacity for their property and affairs. The personal injury solicitor should approach a professional deputy for an expert witness statement, setting out an estimate of costs for the application to be appointed professional deputy and their ongoing management costs.  The costs are normally recovered until the end of the life expectancy of brain injured person.

An application to the Court of Protection for the appointment of a deputy involves a fee which is currently £371.00.

The costs of a professional deputy are governed by the Court of Protection. Depending on the fee earner’s experience and where they are based in the region will depend on the hourly rate to be charged.

The deputy’s costs are assessed annually by the Senior Court Costs Office to ensure the costs are reasonable and proportionate, any costs deemed not to be, will be reduced accordingly by the court assessor.

When an application is made by a proposed lay deputy, the general rule is that the professional costs and disbursements are paid from the protected person’s money.

Personal Injury Trust

When the client is a minor or otherwise incapable of managing their funds, the costs for setting up and the management of the trust can be claimed for as part of the settlement. A private client solicitor would normally provide an expert witness statement advising why a personal injury trust would be beneficial and the likely costs for setting up and managing the trust. The costs are normally only recoverable until the age of 18.

If there is a professional trustee appointed, their costs for managing the trust will depend on the professional’s hourly rate. Some firms may work in line with the Court of Protection hourly guidelines however, it is likely to be higher.

AUTHORITY

Deputyship

Depending on the decision a deputy seeks to make, they may be required to make an application to the Court of Protection to seek authority on a particular matter. An example would be litigating on the person’s behalf in relation to a property dispute. The application for such authority can be time consuming and costly depending on delays or enquiries made by the court.

Further examples include renting, purchasing and selling property.

Personal Injury Trust

Decisions can be made more quickly as the trustees only need to consult each other and formalise their agreement in order to go ahead with their chosen action.

SUPERVISION

Deputyship

The deputy is supervised by the Office of Public Guardian which is the administrative arm of the Court of Protection. The deputy is required to submit annual reports to OPG which ensures that they continue to make reasonable decisions in the best interests of the person lacking capacity. 

Personal Injury Trust

There is no relevant independent body to supervise how trustees are managing a trust on an ongoing basis. Nonetheless, the trustees are required to manage the funds within the trust in accordance with the terms set out in the trust deed and can be challenged about any breaches or abuse of trust.

RESPONSIBILITY

Deputyship

Deputies have general authority to manage all a person’s property and financial affairs and not only the funds that arise from a compensation award. The injured person does not have direct access to their funds. Any decisions made by the deputy must be in that person’s best interests.

Personal Injury Trust

Trustees are not responsible for all the person’s financial assets, only those relating to the funds held within the trust.

The injured person retains a large degree of control in respect of the funds held within the trust and the funds are fully accessible.

If they wish to close the trust down later, then this is their decision to do so.

If you feel that you require specialist advice to help you choose the right option for you or your loved one, BHP Law offers a no obligation 30 minute telephone appointment, please do not hesitate to contact Simone Kent at SimoneK@bhplaw.co.uk alternatively, contact a member of the Court of Protection team on 01325 466794.