52 weeks to create a personal injury trust?

Is there a time limit of 52 weeks for setting up a personal injury trust?

There is no time limit within which a trust to protect compensation must be set up.

The best approach is to set up a trust to protect your compensation as soon as you receive the compensation.

Ideally a trust should be set up when the first compensation payment is received.

I am often asked if there is a 52 week period when benefits are protected. It is important to understand what this 52 week period means.

This 52 week period is not a time limit for setting up a trust, it is a period of grace for people already claiming means-tested benefits to sort out their financial affairs and set up a personal injury trust.

The 52 week period is not a period during which you can just blow the money.

At the end of the 52 week period the benefits agencies can examine how you have spent the compensation. If the expenditure is not considered to be reasonable for someone receiving benefits you will be treated as still having the money. So the 52 week disregard only protects you if you set up a trust within 52 weeks of first receipt of compensation and make no expenditure before the trust is set up.

You only have one 52 week period which runs from receipt of the first payment of compensation, even if it was only a small interim payment. You can set up a personal injury trust at any time, but not doing it quickly will create complications as the compensation will be treated as your personal funds for the time before the trust is put in place.

If you have been on means-tested benefits and set up a trust “late” can you identify the compensation through an “audit trail?” The same issue applies if you have not been claiming means-tested benefits as the compensation money will have been distributed into bank accounts, investments and things you have bought. A personal injury trust can only hold compensation and income earned on that compensation. So unless you have left the compensation untouched in its own account setting up a trust late is bound to invite questions.

The belief you only have 52 weeks to set up a trust comes from a misunderstanding of the rules which apply to benefits. The most important legislation contains a list of the capital which is disregarded when assessing entitlement to means-tested benefits. One of the disregards is personal injury compensation for a period of 52 weeks beginning with the day on which the claimant first receives any payment in consequence of that personal injury. Quite separately the legislation lists as a disregard the funds of a trust derived from personal injury compensation. These are two quite separate items but you can see why one is thought to be a time limit for the other.

One important point about the 52 week disregard is that it does not apply to all benefits. So if you are receiving a benefit which has no 52 week disregard you are putting your benefit at risk immediately. So do not sit there asking am I too late, as it is never too late to set up a trust. It is delay which creates problems so contact us for clear advice.

The best approach is to set up a trust to protect your compensation as soon as you receive the compensation.

Contact us now.

About Mark Thompson

Personal injury and accident specialist solicitor
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29 Responses to 52 weeks to create a personal injury trust?

  1. I too have only just heard about personal injury trusts and am so disappointed I was not advised of this at time of compensation settlement: do I have a claim against my solicitor?

    I reviewed near £1mllion in 2004 after a serious non fault RTA in 1999 during which I sustained spinal, heart, lung, limb and brain injuries. I have used my claim to fund my life since then being mostly unable to work and not claiming benefits. I do now revive, though in dispute, of ESA, my savings are now running low I live with great anxiety of how I will manage and pay pills as my physical and mental condition has deteriorated hugely, leading to unexpected,,especially during my claim procedure, to major huge risk spinal surgery. This has left me more debilitated than ever hence my look to financially coping. This seems so unfair I’m having to use final compensation funds to cope whilst unable to earn until I am destitute and then have to claim on the benefits system when there is the personal injury trust system which surely I should have been made aware of to up 12 years ago :(((

    • Mark Thompson says:

      By 2004 knowledge of the benefit of trusts for compensation was widespread among solicitors and barristers in the personal injury field. A trust should have been discussed with you.
      You can still set up a trust now as there is no time limit. If you are to think about suing your solicitors you must do what you can to stop the loss, so setting up a trust now should be your first step.
      There are strict time limits on negligence actions against professional advisers so move quickly.

  2. Nicola white says:

    I had compensation for a road traffic accident in 1993 at age 18 from which I became paralysed and tetraplegic and in a wheelchair. I settled out of court in 1995. I got roughly £875000. At the time I was advised to put half in an annuity, which gives me a monthly income and I got some to buy a property. The rest was invested for me by a financial advisor who looked after my money and invested and advised me until last year when she retired and another advisor took over last year and has now advised me that my money should have been put in a personal injury trust. This is the first I heard of personal injury trust. I never heard of them before. I feel robbed because I feel I should have been advised a long time ago of this in order to protect my money, which has been used up on paying bills and expenses I would not of had to pay if my money had been in a trust From the beginning. Is there anything I can do against the solicitor or the financial advisor for failing to advise me of personal injury trust.

    • Mark Thompson says:

      The purpose of a trust for compensation is to ensure the compensation is ignored when benefit agencies assess your financial situation. So if you do not have much money beyond the compensation you will be able to claim means-tested benefits. Such a trust will also mean the compensation is ignored if a local authority looks at your finances before offering care.
      Ownership of a home in which you live is not a factor in assessing your financial means.
      You say you have income from annuities bought with part of the compensation. Settlements like yours were called structured settlements. They work very well, but have become less popular as annuity rates dropped. The income from the annuities will be ignored for benefit purposes. It is treated as if it were held in trust.
      So a major part of your compensation is already ignored for benefit purposes. To answer your question I will need to know more about your finances; how much income and capital do you have which is not linked to the compensation; and how much compensation you have in cash or savings.
      You are entitled to some benefits based on your disabilityalone. Which of these benefits do you receive?

  3. liena says:

    Hi Mark
    I put all my claim in personal injury trustee but I did not inform my benefits until now since 4 month ago because Iam afraid they stop the benefits ? because I set up the trustee after 18 month from the first interim payment.
    Any advice?
    if they found out later what the will do with me? and what I can do?
    thank you

    • Mark Thompson says:

      There is not a time limit of 52 weeks from first receipt of compensation to set up a trust to protect compensation.
      If you are in receipt of benefits when you receive a payment of compensation and you do not set up a trust within 52 weeks, then the compensation you have received will be taken into account and may reduce or stop your benefits. A simple example would be an interim payment of £2,000 is unlikely to reduce your benefit, but a payment of £20,000, not placed in a trust within 52 weeks, would stop your benefits.
      Your duty is to tell the benefit agencies of a change in your financial circumstances and then at the same time you should tell them about the trust to ensure the compensation in the trust is ignored by the benefit agency.
      Sometimes an agency will accept notice of the compensation and trust and raise no questions. It is becoming more usual for agencies to ask how much money you received, when you received it a the date of the trust. There is not a consistent pattern, but questions are becoming more regular. I do think the benefit agencies believe a trust cannot be set up more than 52 weeks after the first receipt of compensation, which is why they ask their questions, but they are wrong.

  4. liena says:

    Hi Mark.
    would you please tell me How I can pay off my credit card one time from my trustee. the amount 2000 pound. thank you

    • Mark Thompson says:

      Credit card bills always include the facility to pay using a cheque. The cheque can be sent by post or there is usually a payment slip which can be taken to a bank or post office.

  5. liena says:

    Hi Mark
    I have personal injury trustee . I had loan 15000.00 early before I got my claim and open personal injury trustee few months to pay for friends what I owe them .My injury trustee £177000.00 . so can I pay off the loan one time? and how? because the bank give my trustee cheque bank only. if the trustee pay to my bank account to let me i pay my loan it mean over 6000 will come to my account. so how i pay? thank you

    • Mark Thompson says:

      Pay off the loan with a cheque drawn on the trust account.
      All payments, so far as possible, should be made direct from the trust. You are correct not to channel the money through your personal bank account.
      Even though the trust only has a cheque book it is possible to set up a bank transfer. This is the reason I recommend that a local bank account is set up for a trust. The signatories can go to the branch and arrange a transfer to another account.

  6. Chetna Patel says:

    I had a case against NHS which was settled outside court and I’m waiting for my compensation. I have to pay back esa to DWP 30,000 pound what they have paid me for the past 6 years. Test will be sent to me for about 55k. Because the DWP know about claim will I need to tell them and will my esa money stop even if I put my cheque in my other account that my benefit money does not go into.

    • Mark Thompson says:

      When a compensation case is settled the party paying that compensation must repay to the government all benefits received as a result of your injury. This is called “recoupment” and you can see more here.
      Turning then to your compensation cheque. When you receive the compensation you must inform all benefit agencies you deal with. Assuming you currently receive means-tested benefits those benefit agencies will ignore the compensation for a period of 52 weeks. If you have not set up a trust for the compensation within that 52 week period your means-tested benefits will all stop. Some people think they can spend the compensation money within this 52 week period, but life is never that simple. Any compensation you spend in the 52 week period will be assessed by the agencies as to its reasonableness and if not considered reasonable you will be treated as still having that money and your benefits may be reduced or stopped.
      So this 52 week period can be a trap and the only safe way is to set up a trust now and pay all of the compensation into the trust. Once the compensation is in the trust it can be invested and spent without any question from the benefit agencies.
      So set up a trust now and avoid problems with your benefits in the future.

  7. Nick says:

    Hi,

    I have received a personal injury claim and was awarded £1.3m from an accident over 5 years ago. I received the monies 3 years ago you.

    I am in receipt of DLA (Higher rate) as well as incapacity benefit.

    Am I too late to set up a Personal Injury Trust?

    • Mark Thompson says:

      There is no time limit for setting up a trust to protect compensation.
      Ideally a trust should be set up when the first compensation payment is made, but there is nothing to prevent you setting up a trust many years later. The only people who may have problems if a trust is set up “late” are those who were claiming means-tested benefits between receipt of compensation and the establishment of a trust.

  8. nicola Griffiths says:

    I am on ESA benefitts and have won a out off court settlement nearly it is for sexuall abuse suffers as a child and my claim against the Staffordshire county council have ageead to compensait me will I be able to buy a house with my money wich will all be gone then claim beneffits I’m beginning to wish I never settled as now I’m worried that the counsill will ask me for all the rent iv had over the years on housing benefit and all the money I claimed over the years back wich means ill have no money left I realy thought I could buy a house make a will leave it to my son and then when I get better get a job but now I’m worried that ill have to pay housing benefit back for the years that I haven’t worked is this correct if it if my solicitor is the inlet one to have benefited from this abuse and my farther which makes me feel suicideal

    • Mark Thompson says:

      Nicola, I do not think you ought to be worrying. The law accepts that compensation is not paid for the costs of everyday living, so you can continue to receive the benefits you need provided the personal injury compensation is held in a trust. This is not a loophole, it is the law.
      A trust which holds compensation is usually written to allow it to buy property and most other investments.
      The best approach is to put the compensation straight into a trust. It can be done later, but best to do it immediately if possible.

  9. chantal says:

    Please could you advise.
    I will be receiving £2900 for a car accident in a few weeks.
    I have just started jsa contribution based.
    Will I be affected.
    Will I benefit from a compensation trust fund?
    How much will be deducted from me?
    Do I inform jsa?

    • Mark Thompson says:

      Jobseeker’s Allowance Contributions Based is paid because of your national insurance contributions and is not means tested. You may need to claim means-tested benefits in the future and provided the compensation you have received does not take you over £6,000 there seems to be no need for a trust. When checking where you stand against the £6,000 do remember you are assessed as a household and not as an individual when claiming benefits.
      There is no need to inform anyone about receipt of the compensation unless you are in receipt of means-tested benefits.

  10. Chris Husbands says:

    Hello Mark. I talked you on the phone a couple of weeks ago about keeping my benefits when I get my accident at work compensation, it all seemed simple, until I told DWP, they asked me to send details,I sent them a copy of the Bank receipt and the letter I received from my lawyer, explaining that one amount went to DWP and the other amount to me, said in the letter that my benefits shouldn’t be affected for 52 weeks. They Have not replied, but I have just received a letter from the Housing and council tax reduction scheme office, saying they have been informed by the DWP that my circumstances have changed and any payments have been suspended.

    • Mark Thompson says:

      If you are in receipt of means-tested benefits and there is a change in your financial situation you must tell the agency which handles your benefits claim. So I think the local authority are kicking up as you did not tell them you had received the compensation. It is not unusual for a claim to be suspended until the agency has the chance to check out the position.
      Once the agency knows you have received the compensation it must disregard the amount for a period of 52 weeks from receipt of the first payment of compensation. Once the local authority has the information it needs they should reinstate your benefits.
      Now this is the complicated bit. The compensation must be disregarded for 52 weeks, but once the period ends the agency can examine how you have used the money. If the view is you have blown the money to remain entitled to benefits, you will be treated as still having the money even though it has been spent. People ask if they can repay a loan to a family member or put the money in the account of someone else. Can you prove there is a genuine debt, or that you have given the money away, or is it being hidden?
      My firm advice is if you do not have legitimate loans to repay set up a trust and pay all compensation into the trust fund. You can then spend the money as you wish and it is none of the benefit agencies’ business what you spend it on.
      I appreciate this last section is off the point but it needs to be said as the ability to protect compensation with a trust is a very generous provision and it strikes me as daft to try to produce the same result be risking your benefit entitlement.
      In your case Chris I think the agencies will do the decent thing once they have all necessary information, provided you are inside the 52 weeks.

  11. David says:

    My wife received a personal injury compensation payment of £13,000 July of this year. She is now sixty five and for the past five years has been in receipt of pension credit guarantee and council tax benefit. She has spent about £5,000 paying off her credit card and buying essentials for the house (carpets, new fire, etc). Should she have taken out a PIT and as she didn’t, should she now?

    • Mark Thompson says:

      The answer depends on your overall finances as you are assessed as a unit rather than individuals. If when you do the sums you have an amount of money which reduces or stops your benefits then the answer is to set up a trust now.
      Compensation is disregarded, or ignored, for a period of 52 weeks, but if no trust is set up by the end of the 52 weeks the way in which the compensation was spent can be examined. If you are seen to have blown the money to keep benefits you will be treated as still having the money.

  12. Dear mr Thompson
    My elderly father has recently been awarded personal
    personal injury compensation and would like to open
    a personal injury trust, but unfortunately will be in hospital
    for long period, he is currently in receipt of pension credit
    Does his pension credit come under the 52 week rule before
    he eventually opens trust?
    Thanking you,
    R.Martin
    ,

    • Mark Thompson says:

      Pension credit is something of a mess so far as its regulation is concerned. The 52 week disregard does apply, but there is good reason not to rely on it. Once a compensation cheque is received and paid into a personal bank account it becomes diluted. The only money which can be placed into a trust is compensation, but once it is diluted in a personal bank account how can it be shown what is compensation, and what is not. If you really cannot set up a trust quickly I suggest putting the compensation in a separate bank account.
      Your father needs a trust document or deed, and a separate bank account for the compensation. Provided he has full mental capacity he could instruct me to work with you, and subject to some work on your side I am confident a trust could be established quickly. This is the best solution, and one which will avoid difficulty in the future.
      pension credit is a useful benefit as it is a passport to other benefits. We also need to keep an eye on the possibility of care in the future, and keeping the compensation outside the local authority financial assessment may prove vital.

  13. Peter says:

    I should add, I am currently in receipt of DLA (highest rate mobility, lowest rate care).
    I continued to claim ESA between May 2011 and June 2013 (and I received 3 interim payments during that time). In my ignorance, I believed that interim payments did not count as capital in the traditional sense because they formed part of injury compensation and so I did not need to disclose them to the DWP. (My solicitor didn’t tell me otherwise, and I simply paid the cheques into the same bank account that the benefits were paid). The reason I then stopped claiming ESA in June 2013, was not because I was no longer eligible (I was still signed off by my GP and met all other criteria) but because I received an interim payment worth £10,000. I was then informed, a week or so after that was paid into my bank account, (not by my solicitor) that if I had ANY savings over £6000, regardless of whether it came as part of a settlement or not, meant I was no longer eligible to receive ESA. Coincidentally, I was due to re-apply for ESA in June 2013, so I simply did not re-apply for the benefit. (Any benefits I have received so far are to be paid back by the other side). Clearly, my own lack of understanding and lack of advice means things have been done incorrectly, and I provide this information to hopefully, help you answer my original post. Sincerely, Peter

    • Mark Thompson says:

      Thanks Peter.
      It is more of a mess than I thought.
      My advice remains the same in that a trust should be set up now and notice of the trust should be given to any agency handling your benefits claim. Once the agencies react you will be able to see the consequences of not setting up a trust at the outset, and the loss or reduction of your benefits should be claimed from your solicitors.
      Identifying the need for a trust to protect means-tested benefits is not difficult, but solicitors concentrate on the compensation and sometimes overlook the consequences of its receipt.

  14. Peter says:

    Dear Mr. Thompson,

    I was involved in an RTA towards the end of 2010. The other side admitted liability immediately but, due to my injuries, we have only just reached the stage where pre-trial settlement negotiations are taking place. During one of these meetings my solicitor recommended a PIT to manage any compensation I receive. I had never heard of a PIT before this so I did some research. I realise I can set up a discretionary trust at any time, but it is true that I received an interim payments in june 2011, 2012 and finally in 2013. All the money from those interim payments has been now spent, and my capital has fallen below £6000 in this latter period whilst awaiting my final settlement. I am obviously unhappy that I was not advised to place the interim payments into a PIT from the start, but looking forward, have I been drastically compromised. The final award *should* be greater than the IHT threshold of £325,000. Should I go ahead and set up a discretionary trust anyway? Sincerely, Peter

    • Mark Thompson says:

      A discretionary trust should only be used if it is really necessary. If you place more than the inheritance tax allowance into a discretionary trust you will face an immediate tax bill. There are other tax consequences which apply to a discretionary trust, so there must be very strong reasons to use such a trust vehicle.
      Most people who set up trusts to protect compensation use a bare trust. This is a simpler mechanism which means the compensated person retains control as they can change trustees and bring the trust to an end as and when they wish. Tax on income from the trust fund is dealt with in the tax return of the compensated person, so a bare trust is much simpler than a discretionary trust.
      It is never too late to set up a trust, but I always advise that a trust be put in place to hold the first interim payment. Some benefits agencies will argue that the compensation must be treated as one, so not setting up a trust within 52 weeks means none of the compensation can be protected by a trust. That is not correct but such an agency may stop your benefit and you then have to appeal with the inevitable delay that will cause.
      Many solicitors think that interim payments which are to be spent quickly, or which are below the capital levels set for benefits, do not require a trust. They are wrong, and they risk frustration and anxiety for their clients, and if benefits are reduced or lost those solicitors risk an action for professional negligence.
      You should set up a trust right now, and if any benefits are reduced or lost because the trust was not set up earlier then you can look to your solicitor for failing to provide the necessary advice.

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