If I do not claim benefits do I need a personal injury trust?

I remember a call from a lady who had just received a cheque for £20,000 compensation from a personal injury claim. Neither she nor anyone in her family were claiming means-tested benefits; but she intended to save the money for the future. Her compensation solicitors advised a personal injury trust was not necessary. Were they right or wrong?

Personal injury or compensation protection trust necessary to plan ahead

Wrong is the answer, I am afraid.

The advice was wrong because the circumstances of the family were only looked at over the short term.

If we look ahead and find that two years down the track means-tested benefits have to be claimed, the saved compensation will prevent that claim, as the family will have too much capital. Most of the savings will have to be used up before benefits will be paid.

When the compensation was received, she should have been given full advice so she could plan ahead. The answer for this caller in the scenario above would be to sue the solicitors who gave the wrong advice.

Personal injury trusts have been around for a long time but personal injury solicitors still get it wrong. Thankfully a staff member at the client’s bank asked if she had considered a personal injury trust. This advice saved the day. A trust was prepared, a separate bank account opened, and save for the slight inconvenience of running a separate bank account potential problems have been avoided.

This situation is not uncommon. There are many people who have received personal injury compensation, not set up a personal injury trust as no benefits were being claimed at the time, and who have tucked the money away for a rainy day. When that rainy day comes they may not be able to claim means-tested benefits.

There is an extra dimension to this story. If care funded by a local authority is required in the future, a personal injury trust will keep the capital of the trust outside the financial assessment undertaken by the local authority. Without a personal injury trust the compensation you have carefully saved may mean you pay for the care yourself. Read more about costs of long term care.

You do not have to set up a trust immediately if benefits and care are not necessary. There is no time limit for setting up a trust, but make sure the trust is in place before you seek financial help. Make sure the compensation is identifiable, as only compensation for an injury can be held in a trust.

Advice about the need for a personal injury trust must be for today and the future. I know you don’t want to think about worst scenarios, but they do sometimes happen.

The trust fund can be invested in any way you can invest personally, so there is no downside to setting up a trust, even if you do not strictly need one immediately.

If you set up a trust and find you do not need to rely on it, the trusts we write can be ended, or revoked to use the technical term, at any time.

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