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What you need to know about Personal Injury Trusts

Posted on 22nd June 2021 in Later Life Planning

Posted by

Emma Ruttley

What you need to know about Personal Injury Trusts

Receiving compensation as a result of a personal injury claim can provide some comfort when living with an injury or disability, however it can also be a daunting prospect. For many, the idea of managing the funds for themselves or their child can be quite overwhelming.


What are Personal Injury Trusts?

Personal injury trusts offer advantages for people who have received (or are due to receive) compensation via a personal injury claim. Often, if you have needed to make a claim of this kind, you will be entitled to means-tested benefits. Receiving a large sum of money could affect this entitlement, if the sum is paid directly to you.

Trusts are a useful vehicle for people who wish to continue receiving their benefits while keeping the compensation funds available to use. Once placed into a personal injury trust, the funds are not taken into account by the local authority when calculating your entitlements. If you are over 18 and have the capacity to manage your affairs, you can choose to put a trust in place yourself and decide who your trustees should be.


How can Personal Injury Trusts be used?

Personal injury trusts can also be used by parents, for children under 18 who are in receipt of personal injury funds. In this situation, the funds would normally be placed into a Court bank account with low interest rates and then paid directly to the child when they turn 18. Under a trust, the trustees have greater flexibility and can consider options for investment, which may be more beneficial for the child long-term. Placing the funds into a trust also protects the child from automatically receiving a large payment at quite a young age, as the funds can remain in the trust until they and the trustees have decided what they would like to do.

Trusts can also offer a layer of protection for people who may be vulnerable or unfamiliar with managing large sums of money, as trustees are appointed to deal with the running of the trust and management of the funds. It is possible to appoint professional trustees to take on this role, for instance if the compensation payment is especially large or complex, in order to relieve family members or friends of this responsibility.


How can Tozers help?

There are specific rules which must be followed when setting up personal injury trusts. If you are considering your options in terms of personal injury compensation please contact our Vulnerable Clients team.

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