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.

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.

Personal injury trust fund to protect means tested benefits

Author: Mark Thompson

Personal injury and accident specialist solicitor

59 thoughts on “52 weeks to create a personal injury trust?”

  1. Hi Mark, I was previously involved in a rta and 14months ago I received an interim payment of £1000 which I used to purchase a mobility scooter. I was and still am in receipt of ESA, Housing and council tax benefit and have a decent council care package in place for which I receive a direct payment/personal budget from the local council which pays for most of this.
    The other parties solicitor has offered a settlement of £13,000 but I’m so terrified of losing my care package and benefits that I’d rather not have the compensation or just give it to charity. I’ve only just learned of a PI trust and realise I’m outside of the 52 week period. I’ve been advised to still open one because there may be a “chance” of still protecting my benefits, even at this late stage. Would you agree with this or would this just be a waste of time and money on my part? Many thanks Maria.

    1. You do not need to worry.
      The 52 week disregard is not a time limit within which a trust must be established. It is a period during which the first payment of compensation is ignored.
      You can still set up a trust now and I would advise you to do so.
      You have already received a small compensation payment, so the final compensation should not be paid into your personal account. Set up the trust and its trustee bank account and have the compensation paid direct to that account.

  2. Hi Mark
    My PI Case took over 5yrs and during that time I received 3 interim payments. I have 2 questions regarding the 52week grace period and regarding the interim payment amounts.

    Firstly, only after my case was completed and the PI compensation was paid to my solicitor’s account (they are still holding it until my trust bank account is opened) did I learn of the 52wks period. My solicitors never advised of this so I am in breach of not advising the DWP when I received my first interim payment of 20k. They had said setting up a trust would be done at the end of my case. My Union which hired the firm on my behalf has told me I need to email my solicitors as they have liability insurance saying that they would need to be liable for any losses as they failed to advise me and take the appropriate action, which I have done. The only response I received was that this would be taken to the department head should an issue arise. My question is, what should I be doing about this? What questions/points should I be asking/raising and what type of responses should I be getting? I am not comfortable in just sitting and waiting doing nothing. At the moment they are still working on my case finishing up but once the last item is done and the case closed, I do not want to hear from them that they are no longer being paid (by the defendants) so they will no longer be working on my file.

    Secondly, since the compensation has been paid, I have received a number of smaller payments to pay off debts however I do have a debt management plan as I depleted my savings not earning. So my debt is just below 20k and includes an unpaid overdraft. It was higher but the bank has written off some of the interest. So my question here is, does my debt offset the interim payment amounts so I am not in trouble?

    I will add a third query, in reading your comments, you have said that expenses should be paid directly from the Trust Bank Account however in my case, after months my bank account is still not opened and my solicitors have been transferring money directly to my current account to pay-off my debts. I am guessing that this will be a problem?? We make sure that my balance remains below 6k.

    Any advice would be welcome.

    Kind regards

    1. If you claim means tested benefits and your financial position changes, you must inform the benefit agency. That includes compensation in respect of personal injury.
      If you put personal injury compensation into a trust, you must still tell benefit agencies about the compensation and trust.
      The 52 week disregard is a period of grace in which to set up a trust, not a period when benefit agencies need not know of the compensation.
      You are in a difficult situation due to confused thinking, at best.
      I have found benefit agencies to be quite understanding where personal injury compensation has not been handled correctly. I won’t and can’t guarantee this, but your priority should be to get the trust set up, to receive no more compensation into personal bank accounts and get all remaining compensation into the trust bank account.
      Notice should then be given to benefit agencies of the compensation and trust. It is only then you will know if you have a financial loss due to poor advice.

      1. So sorry to hear your solicitors have been so negligent. What the Solicitors should have done is notify the DWP on your behalf when you had your first interim payment. Keeping your account balance below 6k is a valid approach BUT the DWP are vindictive in their pursuit of what is called deprivation of capital so there is a significant risk you may still be liable for “income” related to your interim payments and that is unless you set up a TRUST – Barclays does this the simplest and does offer TRUST accounts – Ask Mark to give you his letter to the banks to open a TRUST account – Mark helped me with Barclays so I am sure he can help at least in this aspect of your case. NOTE if you complete DWP forms like ESA3 there terms of reference to TRUSTS does not tell you that you are except if you hold a BARE TRUST and can refuse to quantify any assets held in a BARE TRUST holding either capital or assets : I am sure Mark can advise further.
        My initial thoughts about the poor service from your Solicitor is log a formal complaint and then speak to the Legal Ombudsman.
        Hope this helps.

        1. I do not like the idea of keeping personal funds below the £6,000, as interim payments are received and the money is spent. I think you are asking for a deprivation of capital assessment. This can apply even after only one interim payment if a trust is not set up within 52 weeks.
          I find the best way to sort out any such difficulty, is to set up a trust and get the remaining compensation into that trust. At that point I tell the benefit agencies of the compensation and trust. In most cases, the agencies have gone along with the badly informed or confused thinking of the compensated benefit claimant.
          If you intend to pursue your solicitor for poor advice, I suggest you also do what is necessary to get your benefit affairs in order.

  3. I think this is not commonly known at all, and I was going to protect my funds in a personal trust then realised that it is not necessary right now as I am not receiving benefits. However there is not much information to be found about this for people in this situation. If you are not receiving benefits but anticipate you might do in the future (at an unknown time), what should you do to ensure that you can set up the trust at a later date – be that 2 years, or 32 years later? What about if you wish to invest the funds in the interim – can the profits be protected in a fund, and how do you ensure this is possible? And, if you do not set up a PIT, are the funds protected in the case of divorce? Are there any other concerns about not setting up a trust right away, for those who are not at the time of receipt of the compensation in receipt of benefits? Also, can you put the funds in a trust, then remove them (but keep them separate), and then put them in a trust again? Thank you

    1. If benefits may be claimed in the future, set up a trust now for your compensation. It can be done later, but quickly moving funds into a trust and then applying for benefits will give benefit agencies a good argument to say no.
      The trusts I write allow a wide range of investments to be made. With a bare trust, you are the taxpayer, so setting up a trust early has no tax downside. Income and profit on trust assets can be retained in the trust.
      A bare trust, created by you, will not protect the compensation in the event of divorce. The trust will simply identify why you hold this money and why it should be treated as yours, rather than up for grabs.
      You can set up a trust and change your mind at a later date. provided the compensation and its income and gains are identifiable, you could set up a trust again.
      Rather like delaying setting up a trust, it is vital the compensation and any gains made are identifiable, as only those can be held in this type of trust. The passage of time simply makes this difficult. If a trust looks like being necessary, set it up early.

  4. Hello Mark, I spoke with you within this week. As discussed I was expecting a compensation which Have just been paid into my bank account. Amounting to £6180. I’ve got some debts that needs settling. Credit card bills, payday loans etc. And my Mrs has also go some card bills and loans that I will like to pay with this money. Should I pay my Mrs debt as well as mine with the compensation money will it be seen as blowing the money by DWP? Or do I need to set up PIT. I am however expecting other compensation to be paid within this year which will be around £80000

    1. If you were only to receive the first pay of about £6,000, I think benefit agencies would accept payment of commercial debts, which would make a trust unnecessary.
      As you are due a second substantial payment, I suggest you set up a trust now. The trust will be written to accept both compensation payments. You can then pay your debts from the trust and all will be clear to the benefit agencies.

  5. Hi, my friend is going to receive a payment for a rta of approx £8500. She had to have six months off work and struggle on statutory sickness pay.
    She works as a carer 16 hours a week and recieves working tax child tax credit and some housing benefit and council tax reduction as she lives on her own with two dependant children. She has had to borrow some money to get by from friends and family following the accident which would probably take her under the £6000 threshold.
    Would she then still have to inform the benefits agencies and then would it be wise still to set up a personal injury trust?
    Best regards.

    1. As a starting point, it is necessary to report almost any change to a benefit agency. The Government website has a long list. From that list, the entry relevant to your friend says “changes to your pension, savings, investments or property.”
      provided your friend has not received an interim payment, there is no harm in contacting the benefit agency and explaining about the compensation and plans to repay debts. I would be surprised if the benefit agency agreed such debt repayment is reasonable, as they will be cynical as to whether these are true debts. If the agency agree, leaving your friend below £6,000, that agreement should be set out in a letter sent to the benefit agency. I suggest this, as you only speak with one person on the telephone, so a letter will create a record.
      If, as I expect, the debt repayment is not thought to be reasonable or proper expenditure, a trust is necessary.

      1. One tactic that worked in particular was to ask the bank she holds an account with to allow her an overdraft facility. In a particular case a request for a £3,000.00 overdraft was suggested to the bank who because of proof of compensation allowed a temporary overdraft for a specific period. Once setup I would suggest she pays her debtors from her overdraft. Once her compensation arrives in to her bank account the sum will be reduced under the £6,000.00 threshhold allowing her not to have to inform any of the Authorities because her physical capital would be under the £6,000.00 savings limit.
        The only time a financial demand to inform the authorities would be if your capital reached or exceeded the £6,000.00 limit and if the overdraft is paid off which took this below £6,000.00 then there is no qualification they can use to determine she has reached this limit in savings. I would check again with Mark on this… but in the case I refer to, this tactic worked fine.

        1. I really cannot recommend this approach. The money spent from the overdraft can still be treated as notional capital. The “tactic” worked as it was not seen by a benefit agency. It may well be looked into if the claimant is asked to provide bank statements.
          There is a legitimate route available, that is to set up a trust. You can then use the compensation from the trust without looking over your shoulder.
          I think a one-off receipt of money, like an inheritance or compensation, should be notified to a benefit agency, so I am disagreeing with everything posted. Why not use the rules and make life easy?

  6. Following having the same issue and recieving help from Mark Thompson we challenged the DWP on this issue: they indicated the process is dealt with in ESA regulation 115 and even if you get compensation paid to you over a period of time, the process of creating a TRUST will mean the DWP CANNOT consider deprivation of capital.

    Legislation also states that so long as you do not take regular income from your trust fund and only take irregular amounts of funds they also cannot consider the payments to be income: the consideration of whether to assess payments of capital is different in that if you take a lump sum that takes you over £6,000.00 then you may be subject to deprivation if expenditure is not in support of your medical needs, however if you keep such capital payments below £6,000.00 where your savings would not exceed this amount then read ESA regulations Schedule 9 [16] and [17] because ESA regulations dictate that any irregular payment below the legeslative thresholds will be ignored and treated as capital.

    Please accept this as a comment, I bow to Mark Thompsons thoughts and advice – I have gone through this challenge to the DWP and ESA and won my case. General rules are that Trust funds in relation to personal injury awards are disregarded in both capital taken out of the TRUST (under threshold) nor funds of any kind (under threshold can be deemed as income) according to DWP specialists.

    1. Thank you for the information. I take a firm line on transfers between trust and the personal accounts of the compensated person. I advise not to make such transfers. Buy what you need direct from the trust and that avoids any objection from benefit agencies.

  7. Hi

    My son was involved in an rta late last year and we are in the middle of a personal injury claim. He has had 3 interim payments so far but they are dragging their heels in terms of admitting liability. He will get some compensation so should we set up a trust now ahead of time?

    1. The answer depends on whether your son has been receiving means-tested benefits since the accident. If he has been in receipt of means-tested benefits, it would be much better to set up a trust now and not fall foul of the 52-week disregard complication.

  8. Dear Mr. Thompson

    I currently receive ESA support, PIP ,council tax and housing benefit
    I am soon to receive a large sum from a medical negligence claim £42.000
    along with the just under £5,800 savings and the right to buy discount I plan on buying the house I have lived in for 23 years…. I should just about have enough funds to cover it but I am really worried that the DWP are going to cause me problems and maybe stop my benefits.

    Do you think I will have a problem here

    1. The answer to your concerns is to set up a trust. All of the compensation held in the trust will then be ignored by the benefit agencies.
      It will also be possible to purchase the property, so set up a trust.
      An alternative is to ask the DWP and your council if they will object to the purchase. They may agree, particularly if you will not need housing benefit in the future.
      My preference is for a trust. The benefit is the property can be held in the trust, which means if you ever need residential care the house will be ignored. That might prove valuable, particularly if you have family to whom you would like to transfer the property after your death.

  9. Hi Mark,
    I would appreciate your advice regarding a personal injury trust. I am in receipt of ESA, PIP, child tax credit and housing benefit. I will be receiving personal injury compensation of £25,000 and have obviously been advised to set up a Personal injury trust. This will cost me £750, which I think is a bit much. Am I right in saying that all I need from the solicitor is a trust deed to set up a joint bank/ building society account for my two trustees? Surely I could inform the benefits agencies myself? I don’t see how £750 is a justified cost (not to sound like I am being greedy!)

    I was also wondering;
    -how the money in the trust is taxed?
    -If I’m receiving £25,000 how much of that will I have to pay out in tax and how often?
    -Is it right that I’ll be taxed every time I withdraw funds from the trust?

    I understand that the 52 week disregard period isn’t a period to just “blow the money” but I intend to spend the money on my house, ie new kitchen, bathroom etc, which would mean most of the money would be spent within 52 weeks, would this be seen as unreasonable expenditure for someone in receipt of benefits?
    Apologies for so many questions!

    1. Last question first. It is not possible to say what expenditure would be accepted as reasonable by benefit agencies, but home improvement will certainly by declined. You would be treated as still having the money you spent, called notional capital, which means your benefits would be reduced or stopped. If a cooker or washing machine are broken, replacing those would be ok, but beyond the bare necessities you are asking for trouble.
      You are correct, in that the 52-week disregard is there to allow you time to set up the trust, not spend the money.
      Some of your benefits are means-tested, so you certainly need a trust. I currently charge £400 plus VAT, a total of £480 to prepare the trust and contact benefit agencies. The way I work is set out here.
      The compensation itself is not taxed when you receive it, or when you spent it. If you receive interest or income from investment of the compensation, you will be liable for any tax on that interest or income. Bearing in mind the amount of compensation, you will do very well to earn enough to have to trouble the tax man. In the 2017-18 tax year you can earn £1,000 in interest on savings before you have to rely on your personal allowance. Tax allowance details are available here.

  10. Hi Mark
    Again I am here seeking advice! it relates somewhat to your comments about the 52 week ussue and state benefits. But first, Can I clarify one point. The Means Test. specifically the government means test. I have been told by numerous benefits agencies there are multiple means tests BUT a website run by a Council Authority suggests there is only one means test and all Government agencies have to adhere to it!
    A case in point is the Disability Facilities Grant, I am going through the process now and argued regards this issue and my local Council conceeded this point – that there is only one means test. Now back to the 52 week rule for PITS, it seems the DWP ESA dont agree with you, they suggest after 52 weeks then every other interim and main payment is subject to regard even if placed in a PIT TRUST: They have suggested because of the 52 week rule, that payments in to my TRUST and subsequent investment in Property is now fair game to be assessed against means testing benefits.

    Would this be a valid consideration put forward by the DWP?

    1. The benefit regulations set out two “disregards” for personal injury compensation. Number one is personal injury compensation held in a trust. The second is personal injury compensation for a period of 52 weeks from first receipt of compensation. Note the first receipt bit, which means you get only one 52 week period which starts from the first payment of compensation. You do not get a fresh 52 weeks for each payment of compensation.
      One odd thing is the 52 week period stops running when the compensation is spent and can then restart again if more compensation is received.
      The problem I suspect you have, is you have received a number of interim payments which you thought would not create a problem because the amount of each was £6,000 or less and/or you spent the interim payments. If these payments are not held in and spent from a trust, you may be in difficulty. The 52 week disregard says the compensation will be ignored, but when you spend the money, that expenditure can be assessed as to its reasonableness and you can fall foul of the notional capital rules.
      It is the compensation which is ignored in that 52 week period, the idea being to allow you time to set up a trust. The compensation is ignored for a period of time, but not your use of the compensation.

  11. Hi,

    I’ve just had the amount offered £6,750 for a previous RTA. I have debts of around £4,200. Which I would like to pay off. I am on PIP, ESA, Housing benefit and Council Tax benefit. Would this come under the 52 wks and be classed as blowing the money? or do I need a PIT? If so could the debts be paid that way out of the new trust account?

    1. The purpose of the 52 week disregard is to allow you to set up a trust, not to spend the money any old how.
      All personal expenditure is subject to benefit agency assessment. If they do not agree the expenditure is reasonable for someone on benefits, you will be treated as still having the money which may reduce your benefit entitlement. The money spent is treated as notional capital.
      If you are within the 52 week period, you could ask the benefit agencies you deal with if they agree to you paying off these debts. The agencies are more likely to agree to repayment of commercial debts, by which i mean banks and credit cards. They may be cynical about loans from friends and family, suspecting you are “hiding” the money.
      You can pay the bdebts from a trust, but as the amount is not great, why not ask the benefit agency if you are within the 52 week period. If they say no, set up a trust.

  12. Hi

    I received £18.000 personal injury compensation 4 months ago and put it into a trust fund. I’m a single parent so I’m in receipt of JSA Housing benefit and child tax credits. I didn’t put all £18.000 into the trust as I had zero savings and had just moved into a new house which I need to fully decorate and buy household items and also pay off a debt so I put £5.000 into my own bank account. Was I wrong to do this and also during my case another injury was found so I may be receiving another amount of compensation on a much smaller scale though around 3.000 so what do i do about this. These we’re both dental injuries and different dentists for each injury but same dental practice.

    1. Some people think they have created a trust by setting up a bank account. To create a trust, you need a trust deed, which explains the trust, appoints trustees and sets out the powers of the trustees. I will assume you and your trustees have signed a trust deed.
      The best practice is to pay all compensation into the bank account set up by the trustees. You should then use the money direct from that trust bank account.
      Any expenditure from your personal bank account may be analysed by a benefit agency. If the expenditure is not considered reasonable fr someone in receipt f benefits, you will be treated as still having that money, even though you have spent it. This is called notional capital, so will be added to any other money you have to check your eligibility for benefits.
      Have a look at the wording of your trust deed. The deeds I write allow the trust to hold all personal injury compensation and hopefully, your trust will allow the additional compensation to be held in the trust.

  13. Hi

    Im absolutely worried sick, I forgot to inform housing benefits that I had a p.i.t, I informed dwp but been so poorly this year it completely slipped my mind, I did email back in February about how did they want the information sent but then nothing more until this Month

    Am I going to be in big trouble, being a p.i.t it doesnt affect the amount/entitlement and can only find info on prosecutions when its been overpaid for example, is it likely il be done for fraud although havnt been paid anything im not entitled to as it was paid into a trust?

    Wish id never claimed it!

    One terrified individual

    1. I do not think you have much to worry about.
      When you are in receipt of benefits you have a duty to tell the benefit agency when your financial position changes. So it is the receipt of compensation which should be made known to the benefit agency. When I set up a trust i tell the benefit agency about the compensation and also tell them about the trust.
      The government are informed of the compensation by the insurance company which pays your compensation. This is done as the insurer is liable to repay any benefits you received as a result of the injury. This is called recoupment and you can read more here.
      You have received money the benefit agency must ignore. Send a letter telling the agency saying you have received personal injury compensation which is now held in a trust. They may ask a question or two, such as how much compensation was paid and when you received it, but I think that will be it.
      Send your letter and stop worrying.

  14. 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 :(((

    1. 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.

  15. 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.

    1. 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?

  16. 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

    1. 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.

  17. 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

    1. 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.
      The way you approach use of a credit card is important. The trustees can allocate funds for a specific purpose. If a purchase is agreed with the trustees, the purchase can be made with a credit card and the trustees can pay the agreed amount when the credit card bill arrives.

  18. 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

    1. 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.

  19. 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.

    1. 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.

  20. 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?

    1. 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.

  21. 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

    1. 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.

  22. 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?

    1. 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.

  23. 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.

    1. 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.

  24. 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?

    1. 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.

  25. 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,

    1. 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.

  26. 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

    1. 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.

  27. 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

    1. 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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