I may need a personal injury trust

Do I need a personal injury trust to protect my compensation and benefits

A personal injury trust is the only legitimate way to hold and use compensation and still receive means tested benefits. Such a trust is an opportunity to keep and use your compensation and receive means tested benefits.

The personal injury trust means your compensation will be ignored if you or others in your close family either claim, or need to claim, means tested benefits. The same applies if you require local authority care.

I continue to be surprised by the advice given to people receiving accident compensation about personal injury trusts. The advice presents a personal injury trust as an optional extra. A personal injury trust is vital in many cases and advisable in others.

Image shows trust deed for personal injury trust to protect means tested state benefits

You will usually receive compensation in a lump sum, and, if that lump sum is not ring fenced by a personal injury trust, you could lose your entitlement to means tested benefits for many years. You can’t just blow the money and then claim benefits, as there are strict rules which apply to depletion of capital. This applies even if the compensation is spent within the first 52 weeks after receipt.

One often ignored benefit of a personal injury trust is the protection it provides in the means test for core undertaken by local authorities. When a local authority assesses your need for care, it will assess your financial situation. If you have tucked away your compensation money for a rainy day, that money may mean you have to pay for your own care. Worse still, there are rules about depleting capital which mean you cannot just blow the money and then claim financial help. Placing the compensation in trust is the answer.

You should see a personal injury trust as a helpful necessity, not an optional extra. The law allows you to hold and use your compensation in a trust, so why not take advantage.

So why do some people decide not to use a personal injury trust to protect their compensation? The reasons are:

  1. The advice from your personal injury solicitor is weak.
  2. The advice comes late in the case.
  3. It sounds complicated and expensive.
  4. Fear you will lose control of the money to trustees.
  5. The compensation will not be noticed by benefit agencies – please note all compensation is notified to the Department for Work and Pensions and all bank accounts opened are notified to HMRC.

The reasons for needing a personal injury trust are very clear. Do not just look at your personal circumstances today, think ahead.

Feel free to telephone for a chat without obligation on 01392 314086 or see how I work and the cost.

Ideally you should create a personal injury trust ready to receive the compensation, or within one year of receipt of the first payment of compensation. You can set up a trust later, but do get advice quickly, as the sooner the better.

A trust is created by a deed, a legal document, which identifies the reason for compensation, it appoints at least two trustees (and you can usually be a trustee) and sets out how the money is to be managed. Your trustees must set up a separate bank or building society account for the trust fund. This means it is clear which money falls outside the means testing process.

You can continue to have some control of the compensation, as the usual method is to create a bare trust. You can bring the trust to an end and add and replace trustees.

The money in a bare trust is treated as yours for tax purposes, so the interest on investments is included in your tax return. This makes management of the trust easy and avoids ongoing expense.

There are occasions when a more complicated type of trust is necessary, but usually a bare trust is the right way to protect your personal injury compensation.

If you have been advised that a personal injury trust may be a good idea and want to set up a trust, the cost should not put you off. I currently work on a fixed fee of £480, which includes VAT, with no ongoing cost and only limited administration for the trustees.

The cost of not setting up a personal injury trust could be the loss of means tested benefits and local authority financial support for care for a long time to come.

You can find questions and answers by clicking here and do feel free to telephone for a chat without obligation on 0330 223 1708.

Author: Mark Thompson

Personal injury and accident specialist solicitor

129 thoughts on “I may need a personal injury trust”

  1. Hi Mark I am expecting a pi payout and will need a bare trust set up ..just one question I know that you recommend having 2 \3 trustees ..but what if I want only 1 trustee ..ie am I entitled to do this in law for a bare trust .. and would you be able to sort this when I need to sort ..many thanks

    1. You can set up a bare trust with you as one of two trustees. The downside of this arrangement is if you become the only trustee, your trust will collapse.
      This is why I advise a compensated person, who wants to be a trustee, to have at least two other trustees. I understand you may not have a third trustee available, or you may want the trust to be confidential, but with you and only one other trustee, you are taking a risk.

  2. Hi, I am currently going through a claim after having a car accident, the other driver has admitted liability. I am expecting around the sum of £450,000 in compensation, if I open a trust as recommended, am I able to buy a house with some of my compensation, if yes, whose name does the house go into, and do I have control of the trust?



    1. A trust should allow the purchase of a house.
      The Land Registry rules mean the trustees are registered as the property owners, but in their position as trustees.
      As I write trusts for compensation, you can be a trustee, you can end the trust when you wish and you can add and remove trustees. So yes, you retain a high level of control. The trick is to appoint trustees in whom you trust and who will work with you.

  3. my son was involved in an awful accident (other side at fault) nearly 3 years ago and has decided to settle on £100,000 from the other sides insurers. He has a few debts from being off work which he owes family members and would like to make a payment off his current mortgage to bring payments down to a minimum. He has 4 children ranging from the age of 7 – 17 all in full time education. He suffers with some side effects of the accident and had to change in job because of pain and damage caused both physically and mentally etc. Himself, wife and 4 children have received some benefits but is worried he may not get help in the future if he pays off some of his mortgage. He was told to put in in a trust fund of some kind?

    1. Does your son and his family receive means tested benefits, or are they likely to need such benefits in the future? If the answer is yes to either point, none of the compensation shoudld be spent before setting up a trust. The regulations which control means tested benefits allow compensation for personal injury to be held in a trust and ignored. The same applies if care from the local authority is ever necessary. Such a trust means benefits and care are still available and the compensation held in a trust used very much as your son wishes. More for you to read here.

  4. I have been offered £73,350 for being raped by a family member when I was 14 years old, for mental trauma and loss of earnings due to depression and anxiety. I am currently receiving Income related ESA and PIP. Would a trust be the best option for me? Can I have my brother as a second signature? THANK YOU!

    1. A trust is the only solution if you want to continue to receive the income related element of ESA and any other means tested benefits.

  5. I am looking to set up a trust fund for A criminal injury compensation payment . It’s for £17000 but as I am on Means tested benefits it would take me over the £16000 ..I have 28 days to arrange it so need advice . I have had advice from a few local financial advisors and they vary in prices and also in the acc advice so was looking for your advice and also how fast I could set it up as obv you do it all online .


  6. I will shortly be receiving compensation for an accident. I have always wanted to improve my younger daughter’s finances (she’s very hard up)by giving her a couple of thousand pounds. Would I be able to pay this from a PI Trust, or am I better to pay it from my bank account now (leaving me with a low amount) and would I be able to top ,my own account up to £6000 from the PI Trust. Thanks very much.

    1. You have not said how much compensation you are to receive.
      You can give the money to your daughter through the trust. That is better than having to squabble with a benefit agency which says you have dissipated your assets.
      If thi sis the first payment of compensation, you can make a once-only transfer to yourself, but keep it way below the £6,000 limit. Expenditure from your personal account is assessed against a test of reasonableness for someone receiving benefits. It is not a generous test, so even though you have spent money, you can be treated as still having it. This is called notional capital.
      If you transferred £6,000 to yourself, even once spent, that money is very likely to be treated as notional capital. That would mean you would always be treated as having £6,000 and your total funds would often be over £6,000, which would reduce your benefit entitlement. If you must make such a transfer, take your existing funds into account and stay well below that £6,000 limit.

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