24th November 2021
24th November 2021
Individuals who are awarded compensation following a personal injury claim should take advice on setting up a personal injury trust.
Personal injury lawyers must actively ensure their clients get advice and assistance on personal injury trusts, this may mean further advice is sought from an expert who specialises in Trusts.
It is important that a professional with expert knowledge provides such advice. This could prevent the client making any future claims against the personal injury lawyer for not advising on this matter, which has resulted in the client losing thousands of pounds in means-tested benefits.
It is essential that advice is provided before any interim or final payments are received. It is also advised that the trust is set up at this time rather than at a later date as this will avoid the risk of any means-tested benefits being lost and not being reinstated.
Should all personal injury clients receive advice on personal injury trusts?
All personal injury clients need to be advised on personal injury trusts regardless of whether the injury is physical or mental.
The reasoning for this is that awards held within personal injury trusts are disregarded capital for means-tested benefits. Advice must not be restricted to cases where clients are in current receipt of means-tested benefits. Many clients circumstances change which could be a result of the injury they have suffered, this may mean they need to claim means-tested benefits later in their life. If there is no trust set up, the client may have too much capital which could take them over the threshold rendering them not being entitled to the benefit they have applied for.
When the client is a minor, during the litigation proceedings, the court may give directions in terms of any settlement reached, including having the award placed into a personal injury trust. The costs of setting up and the management of the trust can be claimed for as part of the settlement.
A private client solicitor can provide an expert witness statement advising why a personal injury trust would be beneficial to the client in such circumstances and outline the likely costs for setting up the trust and managing the trust where a professional trustee is instructed. The costs are generally only paid up to the age of 18, however, the continuation of the trust beyond the age of 18 is advisable.
The main benefit for most individuals is that the award will be disregarded for the purpose of means-tested benefits under paragraph 12 of Schedule 10 of the Income Support General Regulations 1987.
If the client does not opt into a personal injury trust the value of their personal injury award and the income generated from it will be assessable capital and assessable income. This can result in them losing their entitlement to means-tested benefits.
Employment and Support Allowance is an example of a means-tested benefit. If your client was entitled to £397.20 every two weeks, this is an annual income of £10,327.20 and the personal injury lawyer has failed to ensure that their client has received advice on personal injury trusts, a claim for any loss of means-tested benefit may be brought against the personal injury lawyer.
The award will also be ring-fenced if the individual ever requires paid care. Long-term care provision is a mean-tested benefit provided by or through the Local Authority. An injured client may be more likely than others to need such support in the future. The local authority will not take into account the trust fund when carrying out their assessment for the individual’s contribution towards any care they receive.
The trust fund can be used for just about anything the compensated person needs or wants so long as there is no duplication with that which means-tested benefits are supposed to pay for. For example, utility bills and weekly food shopping.
Personal chattels and property can be purchased from the trust for the individual and will be disregarded for means-tested benefits so long as they are not regarded as frivolous and a deliberate deprivation of capital.
Individuals may consider investing all or part of the award. Once invested and any income generated from the investment will remain protected by the trust, so long as they are invested in the name of the trust. This means that the individual will be able to continue receiving their means-tested benefits.
There are many other reasons why individuals may want to consider setting up a personal injury trust such as:
Things to note:
At BHP Law we offer a no obligation 30 minute telephone appointment. If you feel like we could assist you in providing advice on the benefits of personal injury trusts, please do not hesitate to contact our Court of Protection team on 01325 466794 alternatively email: SimoneK@bhplaw.co.uk