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, often called the 52 week disregard, 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.

For most benefits, 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 mean there is a period when the compensation will be treated as your personal funds.

A little history will help. When trusts to protect benefits were first allowed, the compensation had to go straight into a trust. When compensation cases were settled, people were suddenly faced with a decision to have a trust. Many declined, or just delayed as they were confused, so a trust was not put in place. Benefits were lost and the compensation was spent. The government answer was to allow 52 weeks for the trust to be put in place. That was helpful, but it did allow the idea of blowing the money within that year to develop. The 52 week disregard was meant to be a helpful period within which to make decisions, but it has also created a trap.

If you have been on means-tested benefits and set up a trust “late,” you should be able to identify the compensation through an “audit trail?” The same issue applies if you have not been claiming means-tested benefits, but find you now have to. 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. You can see why a trust set up early is best.

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 it does not apply in the same way to all benefits. 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.

Related content

Personal injury trusts and how I can help
Personal injury trusts guide

Protect your compensation

Receiving interim or final compensation payment?

You may need a trust to protect benefits and local authority care.

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