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.

It is the benefit regulations themselves which allow a payment in consequence of an injury to be disregarded, or ignored. A sensible and generous law.

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 financial assessment for care provided 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 and plans have already been made.
  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 when you wish 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. HMRC confirmation can be read here.

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 01392 314086.Personal injury trust fund to protect means tested benefits

Personal injury trust fund to protect means tested benefits

Author: Mark Thompson

Personal injury and accident specialist solicitor

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

  1. My husband has had an accident where he has been told he will never work again. We are currently going through all the compensation channels but he has been registered as disabled and he receives pip, my wage is a low wage so we also get UC to top up my income.
    We are interested in setting up a personal injury trust as we have been told it could be in excess of £350.000. We had an interim payment in October which we gave to our 2 sons to pay off student debts, so we are unsure where we go from here.
    Also we do not have any available funds at the moment to pay trust deed fees

    1. You did not say how much was received as an interim payment. If more than a few thousand pounds, I would suggest a trust now, as benefit agencies may not agree that giving the money to your sons was reasonable. If a trust is right now, we can com eto an arrangement on the fee.

  2. Hi,

    I’m a bit confused re the tax return.

    If I understand correctly, income from a personal injury bare trust would only need to be declared on the personal tax return (SA100) so there would be no need to file a Trust and Estates tax return?

    If the only income on the trust is interest amounting to £50 per annum would there be any requirement to file a self assessment return?

    Thank you

    1. A bare trust is tax neutral, which means the bare trust has no tax liability and the trustees need not file an annual tax return.
      If the trust fund earns income, interest or a capital gain, that should be reported in the personal tax return of the beneficiary of the bare trust.
      The personal tax allowances of the beneficiary will apply. There would be no need for a personal tax return on interest of £50 per annum.

  3. Hi Mark
    I currently have a claim being looked at for historical child abuse so don’t k ow the expected compensation value but I am currently on universal credit and pip,also receiving housing benefit.
    Would a pi account be better for when my award is processed and could my 27 year old some be my trustee?

    1. You should consider a personal injury trust when you know how much compensation you are to receive.
      Family members may be trustees. A trustee should be at least 18 years of age and trustworthy.

  4. Hi Mark
    Several years ago I woke up during a back operation and as a result have complex PTSD. 4 years ago I had my psyche file accessed by my partner at the time step mum ( a psyche nurse for the NHS) who believed I had made it all up and to be honest I can’t blame her, it does seem far fetched. I had to go through 20 weeks of psychology as a result of her reading my file. I felt truly violated.
    We are suing them for data protection breach, breach of patient confidentiality, personal injury to my mental well being and damages/loses. I expect to receive in excess of £30,000. I want to invest it in something my brother (he’ll be a trustee)has going on…can anything I gain through investing go back into the trust or would I have to declare it as earnings? Do you need to be paid you upfront or can you take your fees once I can prove with the check that I have the money and pay you once it clears into the trust account?

    1. The Universal Credit regulations tell us compensation wil be ignored “where a sum has been awarded to a person, or has been agreed by or behalf of a person, in consequence of a personal injury to that person.” I take the view it is the nature of the compensation which is important. If the compensation is for the effect of circumstances on you, whether that be physical, psychiatric or psychological, the sum can be held in a trust.
      A trust for personal injury compensation can only hold that compensation and any income or capital gain made through investment of the trust fund.
      I write bare trusts for such compensation. Such a trust is not taxed in its own right, but you would be the taxpayer. Please note your personal tax allowances apply, so un;ess you find a remarkable investment, I doubt you wil have to pay any tax.
      If you cannot afford to pay me until the compensation is paid, I can be paid from teh compensation.

      1. I am in the same situation and wish to have a trust deed done I can’t pay until I RECEIVE the compensation if you can help me I would be grateful

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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 .


  10. 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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