What is a Personal Injury Trust, and could you benefit from one?

A Personal Injury Trust can arise if you have been awarded a compensation award as a result of a legal claim for injuries.

To set up a Personal Injury Trust, the Settlor of the Trust must generally have the requisite mental capacity to give instructions for its creation.   If you lack mental capacity, an alternative structure for the management of a compensation award is usually more appropriate. In incidents involving a minor (16 or under) a parent or guardian can establish a personal injury trust to manage such funds for their child with approval from the Court.

What is the purpose of setting up a Personal Injury Trust?

A Personal Injury Trust can be a useful legal vehicle into which compensation funds can be deposited and managed on behalf of a vulnerable person.   Funds placed within a Personal Injury Trust  should be disregarded when deciding whether you are entitled to receive certain state benefits.

It is essential that only the funds from the compensation payment are deposited within the Personal Injury Trust, as mixing Trust monies  with other funds (derived outside of the compensation award) could render the trust ineffective; removing the ringfencing for welfare benefits purposes, that would otherwise exist.

If you are considering setting up a Personal Injury Trust to protect benefit entitlements, there is a 52 week “grace period” during which the Trust must be created.  That time starts to run from the first payment on account of a damages award, which could be an insurance pay-out or an interim payment.

How are the Personal Injury Trusts managed?

Any monies held on your or a loved one’s behalf can be accessed by Trustees. The Trustees then manage the money on your behalf. If you are entitled to the funds in the trust, you are considered as the beneficiary. It is essential that the Trustees that are appointed are trustworthy and have your best interests at heart.

If there is more than one Trustee, whether a family member, friend or solicitor, all Trustees will be required to agree should you wish to release funds from the Trust, applying best interests decision making, alongside affordability and other considerations.  To ensure the continued valid operation of the Trust, the Trustees will likely make payments on your behalf, rather than releasing funds directly into your personal account; depending on how it is proposed that the funds are spent.

Our Court of Protection department at Anthony Gold has extensive experience in managing Personal Injury trusts, deputyships, and Lasing Powers of Attorney. We can help advise you on whether you or a loved one would benefit from a Personal Injury trust as well as how to create and manage a Personal Injury trust so that you and your loved ones are protected financially.