Personal Injury Trust Funds Explained
What is a personal injury trust?
A personal injury trust fund, sometimes know as a personal injury trust deed, is a type of trust fund that is set up for those who are receiving a compensation payout due to a personal injury.
What are the benefits of a personal injury trust fund?
The key benefit of personal injury trusts is that they enable you to receive your compensation payout, no matter how large it might be, without affecting any of your means tested benefits. Means tested benefits include:
- Housing Benefit
- Council Tax Benefit
- Disabled Person’s Tax Credit
- Jobseeker’s Allowance
- Income Support
- Employment & Support Allowance
It’s often the case that people who receive compensation claims like to have it paid directly to their main bank account for convenience. If you’re receiving any of the means tested benefits mentioned above then you should strongly consider setting up a personal injury trust fund instead.
The reason for this is that means tested benefits are assessed regularly. If you have more than £6,000 at your disposal i.e. in your bank account, then it’s a strong possibility that your benefits will be reduced. When you have £16,000 or more at your disposal then your benefits could very easily be stopped altogether.
This being the case, if you are expecting to receive a large amount of compensation of £6,000 or more, then you should certainly consider setting up a personal injury trust fund.
Another key benefit of having a personal injury trust fund is that if you were taken into residential care at any point, the cost of your care could not be taken out of your trust fund.
What can I do with my money in a personal injury trust fund?
How you use the money in your personal injury trust fund is down to you and your trustees. If you are receiving means tested benefits then it is wise to continue using this money for what it’s intended for i.e. day-to-day expenses such as food, bills and clothes.
The money in your trust fund is best used for larger purchases that your means tested benefits will not cover. This includes things such holidays, new TV, new car, and property deposits.
Until recently there were restrictions on what you could spend the money in your personal injury trust fund on but this is no longer the case.
What money can I put in my personal injury trust fund?
The only money that should be paid into your personal injury trust fund is the compensation money received from your personal injury claim. It is very important that you don’t put other money into your trust fund.
Who can I chose to be my trustees for my personal injury trust?
For a personal injury trust fund to be set up, it requires at least one person other than you to act as a trustee. This can be anyone you choose over the age of 18. Most people will choose to have a family member as their main trustee.
Choosing trustees is a very important part of setting up a trust fund as they will have a say in how the compensation money in the fund is spent. If you would rather not have a family member as your trustee then most law firms will be able to act as a trustee, although as you would expect, this comes with a fee.
It’s worth mentioning that you do have the power to change your trustees at any time, although they usually have your best interests at heart so it’s better not to abuse this power, rather consider it a last resort if you and your trustees cannot come to an agreement.
Will I need to inform the benefits agency of my personal injury trust?
Yes, you are required to inform the benefits agency, although most law firms will take care of this on your behalf. All you need to do is provide them with your National Insurance number and your local Benefits Agency’s address.
When could I get my money out of the personal injury trust fund?
You can access your compensation money from your personal injury trust fund as soon it is available in the account. However to be able to withdraw the money, any trustees must sign the cheque or cash withdrawal form.