Pros and cons of setting up a personal injury trust

To help you make your decision I have set out the pros and cons of setting up a personal injury trust. For this comparison I will deal only with a bare trust.

Pros:

  • Compensation ignored when assessing your entitlement to means-tested benefits.
  • Compensation ignored when assessing your entitlement to local authority funded care.

Cons:

  • Trust must have its own bank or building society account.
  • The trust must have at least two trustees.
  • Account requires signatures of trustees which means cheque book only.
  • Compensated person must not have direct access to trust fund.
  • There is a cost in setting up the trust.

The significant benefit of a trust for personal injury compensation is the compensation and income received into the trust fund are ignored when calculating your entitlement to benefits.helping you decide if a personal injury trust is right for you

This is a very generous provision which accepts a payment following injury is not a windfall and is intended to cover an injury plus past and future losses. To gain this significant benefit you will have to set up the trust and put up with the inflexibility involved in managing the trust fund. That can be a nuisance, but compare it to the advantages and the decision is clear.

If you are in receipt of benefits, or likely to be in receipt of benefits or care, a personal injury trust should be set up to hold the payment received in consequence of a personal injury.

Happy to have a chat without cost or obligation on 0330 223 1708.

About Mark Thompson

Personal injury and accident specialist solicitor
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11 Responses to Pros and cons of setting up a personal injury trust

  1. John belsey says:

    My grand daughter is about to receive a personal injury payment she has been quoted
    a figure of £660.00 to set up a personal injury trust is this the normal fee as the amount of compensation is about £3,400. Her and her partner are on full State benefits

    • Mark Thompson says:

      The first question I would ask is, do they actually need a trust if the total compensation is £3,400. The answer depends on whatever funds are held by those included in the benefit claim.
      I am happy to work on a fixed fee if you would care to telephone for a quote.

  2. Lyn Parkin says:

    Hi mark, a bare trust is being set up for my son, and all intermin payments will be going into it, along with the final settlement, which may be a few years yet, the compensation is going to include care for him & at the moment my son gets esa, pip & a personnel budget from the local authority to fund care, which in effect our son is our employer as we are his carers, today we were told by the court of protection team at his solicitors, setting up the trust, that we will not be able to have the local authority care fund as you cannot have two means of care, I tried to say that the compension for care would be in the trust, so surely he is still entitled to the local authority funded one as well, we are not being greedy as this would just add more care for him. But she said no you cannot get both. Is this right, also does she mean that this personnel budget for local authority care would end after the 52 weeks disregard as this is all that we are living on, as we
    have both had to pack in our jobs to look after our son, who lives with us, so effectively, would we have to
    wait for another interim payment to be paid into the trust, the first intermin payment is being used for other things in his rehabilitation, ie. Case manager, property specialist,
    etc etc but there may be enough money left for our son & us for a holiday.

    • Mark Thompson says:

      If a trust is being used I assume your son has mental capacity to set up a trust. Therefore the involvement of the Court of Protection is not required.
      Lawyers call this double recovery. It does sometimes happen. A claimant receives compensation to cover the cost of their care needs and then asks a local authority to cover those care costs. Unless there was an order or undertaking within the personal injury litigation, not to seek help for care from a local authority, I do not think there is a problem in you seeking local authority help.
      If a local authority pays for care there will be an argument in the personal injury case to say the cost of private care should not be included. At the moment the Courts do not accept such an argument as there is no lifetime guarantee that care will be provided at public expense.

  3. Kate says:

    Thank you Mark for your clarification.

  4. Kate says:

    SIn response to the above comments, does this mean that:

    a) the compensated person (1st trustee) cannot draw cash at all?

    or

    b) the compensated person can only can only go to the bank to draw cash with a 2nd named trustee?

    What method would the compensated person be expected to use when making purchases, would they:

    a) have to use a cheque signed by both the self and a second named trustee?

    i) If so would both the compensated and the 2nd name trustee have to be present in store?

    ii) could the 2nd trustee alone be present with a cheque signed by themself and the compensated person?

    How would the compensated person be expected to pay in-store for more expensive items that exceeded the value on a cheque guarantee card?

    What method of payment would the compensated person use to pay for items purchased online?

    What method of payment would the compensated person use for impulse purchases made if away from home?

    Can the compensated person have a debit card
    with the trust account?

    Thank you

    • Mark Thompson says:

      A bank or building society account set up fr a trust must operate separately from the personal funds of the compensated person, which I am assuming is you. You have identified the inconvenience of a trust fund.
      You cannot have a debit card or internet banking for the trust account, as having personal access to the account would leave you open to an argument the trust is not operating as a trust.
      I would expect a business to want to see both signatories sign a cheque, but as you will not have debit cards you will not be able to prove your signatures. Cheque guarantee cards are no longer issued by banks.
      The signatories can attend at the bank or building society branch and arrange payment by bank transfer. It is for this reason I recommend using a local bank or building society account.
      Any cash withdrawn and given to you is your personal money and no longer has the protection of the trust.
      The trustees can agree to a specific purchase and pay money to your personal account to make that purchase, but a benefit agency is likely to object to such a practice, so although it is technically possible I would not advise it.
      Being able to hold compensation in a trust and still receive benefits is a great benefit. I am afraid the inconvenience of using the trust fund is the price you pay for the valuable benefit of the trust.
      If you agreed a purchase with your trustees and made that purchase with a credit card or store card, the trustees could write a cheque to pay off the card bill.

  5. Lisa Willcocks says:

    Hello my name is Lisa Willcocks I had a PI payment, a trustee account was set up for me could you let me know if my trustee has to be with me in person when I draw money from the account.Thank you
    Kind Regards
    Lisa

    • Mark Thompson says:

      Hi Lisa,
      If your intention is to protect your entitlement to claim benefits you need a trust to hold the compensation. A trust is set up woth a deed, which is a legal document. Simply placing the money in a bank account, even if it is called a trust bank account, will simply not work.
      I will assume you have a trust deed in place.
      The bank account will operate in accordance with the instructions you gave the bank when you set up the account, the bank mandate as it is called. If you have set up the account properly it should require at least two signatures for any financial transaction. You, as the compensated person, must not have personal access to the compensation as that would mean it is your money and not compensation held in trust. Such personal access would be fatal to an argument that the compensation is held in trust.

  6. chantelle thomas says:

    hi please can you tell me would i lose the interest on the money if i opened a personal injury fund and deposited my money in there . compared to a normal bank account.

    • Mark Thompson says:

      The trust fund is placed in a “normal” current bank account. Some banks say they have special accounts for trusts but the reality is these are simply bank accounts with different names for marketing purposes. The likelihood in these low interest days is that the current account you open may not pay interest. You do not have to keep the trust fund in a single current account. Subject to the terms of your trust your trustees will have the freedom to use a wide range of investments. Make absolutely sure that any investments are owned by the trust and not you personally.

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