Compensation and State Benefits

For many of our clients an accident is a life changing event.  Often they have to turn to the state for financial assistance as they are unable to work or may have care needs. A family member may have given up work to care for them.  Many of our clients that not only have to adapt to a whole new way of life which can be extremely challenging when left with severe disabilities, but also learn to live on what can often be a much reduced income.

The compensation process and the result will for the most part alleviate the financial distress caused by an injury, and we will, along the way ensure our clients receive appropriate interim payments to help with financial difficulties where it is possible to do so.  But what of those clients who have had to turn to the state for financial assistance or may have to do so in the future?  Will their means-tested benefits be affected by the receipt of compensation, whether through interim payments during the lifetime of a claim or the final award at the conclusion?

In theory the answer to that is a straightforward yes.  When assessing entitlement to means- tested benefits, including so called ‘passport’ benefits such as housing benefit and council tax benefit, for both the injured person and his or her partner, compensation monies received will be taken into accounting in considering whether the applicant satisfies the thresholds for receipt of means-tested benefits, which is currently set at £6,000.

That is however the theoretical position and getting the right legal advice means that it is possible to legitimately retain eligibility for means-tested benefits notwithstanding receipt of a compensation award.

A good injury lawyer should always advise a client about the risk to benefits and that fact it is possible to alleviate this risk by setting up a “personal injury trust”.   The benefits regulations expressly state that if personal injury compensation is held in a trust, then it is disregarded for the purpose of assessing eligibility for means-tested benefits.  With the right advice, setting up a personal injury trust is a straightforward process.

For the majority of injury compensation settlements a basic trust known as a ‘bare’ trust is set up.  Two trustees are appointed (one of whom may be the injured claimant) who will administer the compensation funds for the benefit of the injured person.  The actual funds are held in a special trust bank account which is separate to any other bank accounts.  The trustees will then make payments out as and when required, although the only if both trustees agree.

Setting up a personal injury trust not only potentially saves a client several thousand pounds a year in what would otherwise be lost benefits, but a trust carries with it other advantages, including an added layer of protection from exploitation for vulnerable clients.  Further, it enables compensation to be ring-fenced from other assets, so that if there is a change in the circumstances of a client not on means-tested benefits, they can then apply for these.

Advising a client on the benefits of a personal injury trust should not be seen as an optional extra. It is a very necessary part of the service that should be offered. It is ultimately a decision for each client, but they should be allowed to reach an informed decision by being provided with all the relevant information.  The expertise of a good personal injury solicitor should not stop simply because agreement on compensation has been reached or the Court has given judgment.  An essential part of the solicitor’s role is to ensure each client has all the information available to them to enable them to have a suitable structure in place to manage their funds appropriately in to the future and that may well include a personal injury trust.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*