If you receive compensation for personal injury, you must inform the agencies handling your claim for means-tested benefits. It is the change in your financial circumstances which makes notice necessary.
If I prepare a trust for you, I will inform the benefit agencies you have received personal injury compensation and I have set up a trust for that compensation.
It seems to be the case that if I give notice of a personal injury trust, the path is smoother. The benefit agencies are entitled to ask questions, but the questions asked recently suggest the agencies are checking to see if the trust has been set up properly and in time. You may be asked to prove you have a separate bank account for the trust and that the compensation has been paid into that account. You may be asked the date of the trust, and the date of the first payment of compensation, if you have had interim payments. You have no choice but to cooperate, as the agency paying the benefit holds the purse strings.
The benefit agencies are starting to ask how the money in a trust bank account is accessed. If the compensated person is a trustee and can access the money personally, there will be a very strong argument you have not got a proper trust.
“Benefits” such as working tax credit are more complicated. The “benefit” is managed by HMRC and your entitlement is based on your taxable income. Setting up a personal injury trust does not immediately change your taxable income. So I do not give notice of the establishment of a personal injury trust to HMRC. When you next advise HMRC of your taxable income, you need to see if income from the trust has changed your entitlement. If there is a change, then HMRC should be told of the trust and they should be asked not to take account of the income from the trust. This point is dealt with in greater detail if you click here.
I write bare trusts to hold personal injury compensation. A bare trust is not registered with HMRC for tax purposes, as it is the beneficiary of such a trust who is treated as the taxpayer. If the trust receives income or a capital gain, this is included within the personal tax return of the beneficiary. The good news is the personal tax allowances of the beneficiary can be used.
If you have set up a discretionary trust to hold personal injury compensation then notice of the establishment of the trust should be given to HMRC. This is because a discretionary trust is taxed in its own right. A discretionary trust can be useful for personal injury compensation, but great care and advice must be taken to see if a discretionary trust has advantages for you.
Personal injury trust fund to protect means tested benefits
33 thoughts on “Who must I tell about my personal injury trust?”
Hi, I had an Road Incident in 2006 and received 45k compensation; however 10k went straight to repay benefits Having read all the Q&As above; should my solicitor have told me about a Trust and is there anything I can do at this late stage.
Regardless of whether you intend to complain to your solicitors, the priority should be to set up a trust.
There is no time limit within which a trust must be established, but the timing of the trust can mean your benefit entitlement will not be protected until the trust is established.
The way I work is set out here.
I suggest you call.
I’d received a check in November 2019 as a compensation for a RTA that happened in 2016. I had also received two interim payments for £7000 between 2017 – 2019.
I am going to cash in the cheque today or tomorrow into a bare PI Trust bank account.
I’ve read about the 52 weeks period, but I don’t really understand it. How does these two interim payments affect my benefits? Yes I do get nearly all the benefits such as HB, ESA (now income based, previously CB), Child Tax credit and PIP because of my mental health issues. I am on a waiting list for CBT (mental health) and ankle fusion surgery, all results of the accident.
Now the question – has the PI Trust Fund been setup late because of the interim payments mentioned/have I been advised by my former solicitor to setup the Trust Fund too late?
Could you please advise?
You have one period of 52 weeks which starts when the first payment of compensation is received.
It is not too late to set up a trust, but DO NOT cash the cheque into your personal bank account and instead, set up the trust. Once the trust has set up a bank account, then pay the compensation cheque into that account.
Ho there, I received a large PIT settlement and would like to invest some fo by purchasing a hotel to lease, I will of course notify HMRC for tax etc, but my solicitor says she cannot place my PIT as the owner of the hotel and that it would have to go in the trustees name, this would surely mean that I would lose my means tested benefit and the other trustee who is just a friend would own half the hotel?? can you advise??
I think this is a Land Registry rule. The trust is not registered as the proprietor, that is the owner of property; the trustees are registered, but it should be noted they are acting as trustees.
Hi I have just recieved nearly £11.000 compensation for a road accident that happened in January 2012 I was not claiming Benefits at that time apart from low rate dla but due to a break up of marriage in aug 2014 I have been claiming esa plus had the enhanced rate of pip plus housing benefits.i also have carers come to me .
I do have £5000 in an isa which the Dwp know about .
I did not know about this trust until my cheque was sent can I put this money in a trust fund please and do I have to inform the Dwp right now ? I’m so confused .
The simple answer is to set up a trust for the compensation. When I set up trusts, I give notice to benefit agencies on behalf of clients once the trust is set up. Giving notice in this way tends to produce a more considered approach from benefit agencies. If you telephone, the tendency is to suspend benefits while the benefit agency gathers information and makes its decision.
The way I work and the cost is set out here.
Hi, my son is due to receive compensation following a road traffic accident, he is 23 yrs old. I’m my sons appointee as he has a disability, currently he claims PIP & job seekers allowance, does he still need a personal trust account & can i be his trustee aswell as appointee?
We’re unsure how much compensation he will get, but does have life-long injuries.
Do you mean you are appointed to deal with his benefit claims? If you are appointed by the Court of Protection as a deputy, that is quite different
If your son is able to make his own decisions, he has mental capacity, so will be able to instruct a solicitor to prepare a trust. The fact your help is necessary does not mean a trust is not necessary.
You can fulfil more than one role.
If an interim payment has been received, a trust can be set up now, otherwise you will have to wait until a compensation payment is to be made.
I have received compensation of £15k which will be placed in a PIT and bank account. I am in receipt of pension credit, do I need to notify the DWP re this compensation payment as it will be going straight into the PIT. Also, is there a list a acceptable acceptable expenditures which the PIT funds can be used for?
For Pension Credits, personal injury compensation is ignored, so a trust is not strictly necessary. However, many people receiving Pension Credits also claim Housing Benefit or Council Tax Reduction. For the compensation to be ignored for these benefits, a trust is necessary.
I would let the Pension Service know and, if you do receive help with housing, let the council know too.
There is no acceptable expenditure list available. The basic rule is that benefits are intended for the necessities of life, such as rent, food and utilities. Use the trust for anything else, but buy direct from the trust and avoid drip-feeding money from the trust to your personal account.
Hi I’ve received £1million from a car accident and have brain injury I bought a house and now after 5 years want to do extension. My solicitors say it’s unnecessary cost and money is to last me my lifetime is there any thing I can do to change there decision?
Sounds like your compensation is being managed by a trustee or deputy.
Someone in that role must look at the future and your long term needs. Your compensation may have included a small element as to additional housing costs, but it would not have included the purchase cost of a house.
Talk to whoever is managing your money and try to reach an understanding. Try to understand the long term effect of using a large proportion of the money to buy a house.
Hi can I have some advice please I got compansion nearly four years ago my solicitor paid the benefits office money they said I owed and then set up a personal injury trust fund now theve called me and said someone has reported that I have money and they asking how much it was what it’s been spent on and how much is left saying I’ve committed benefit frued is this right can they do that I did what the solicitor told me to do thanks
The benefits repaid are quite separate. This is dealt with under the recoupment regulations which are explained here.
If your solicitor set up a trust, with the funds held separately by trustees, you do not have a problem.
Did you sign a trust document, called a deed, and were trustees appointed?
According to government legislation benefit agencies arent even supposed to ask the amount or information once they know its a pit, not happening in my case, asked for the amount, is it actually my money, can I be given any of it etc etc, how can they have people working there that dont even know their own legislation, utter nightmare
I would be interested to know what legislation prevents the questions you object to.
I think government agencies are entitled to satisfy themselves the money in a trust is from personal injury compensation.
You may be surprised to know that when you make a claim for personal injury compensation, the insurer of the party to blame must notify the Department of Work and Pensions of your claim. Information of any interim or final payment must also be provided to the DWP. This is done as the insurer is liable to repay benefits and pay for NHS treatment following a road traffic accident. So the DWP knows exactly how much you were paid and when.
I had interim payment more than a year ago but the final amount not yet can i do personal injury trust to keep the benefits or no?
There is no time limit for setting up a trust. It certainly helps to set up a trust as soon as compensation is received, but you can set up the trust later.
Some people are confused by what is called the 52 week disregard. This regulation says that personal injury compensation will be ignored for a period of 52 weeks and is quite separate from the regulation which says personal injury compensation in a trust will be ignored. You only have one 52 week period and it runs from the first receipt of compensation. I do not advise anyone to rely on the 52 week disregard, but it is not a time limit for setting up a trust to protect compensation.
I already have a personal injury trust containing £23000. I have also just been informed I can cash in my pension which will be £15000. Can I add that to my personal injury trust so that it doesn’t affect my benefits?
Hi Sarah, I can give you a very clear answer which is NO.
A personal injury trust can only receive compensation paid as a result of personal injury or interest, income or other financial gains on that compensation. I am afraid you cannot place any money into the trust.
The rules do not limit trusts to compensation from a claim and you can see more details here.
Thankyou so much for your reply Mark, its very much appreciated.
I received lump sum of around 240,000 4 years ago. I paid off couple of mortgages I held and bought a bit of property to renovate, now sold! Can I set up a trust fund at this stage in any way?
I was given bad advice really regarding means tested benefits which I can obviously now not claim.
When you receive the first payment of compensation detailed advice is required. When advice is short term mistakes can occur as seems to be the case with you.
It is possible to create a trust at any time but the question is will the benefit agencies and local authority accept the trust fund is outside their financial assessment. You can bring a professional negligence action against your solicitors, but before you think of that we need a chat to see what can be repaired.
Hi mark, i know that if you are claming benefits and have set up a personal injury trust fund that it doesn’t interfere with the benefits you receive such as housing, dla etc but my question is that if you have some previous debts to creditors that you are making small payments because you can’t afford to pay them all out of your benefits, would you be expected to use your personal injury trust money to pay them off? Can they actually find out that you have a trust fund set up.
Money held in trust may or may not give protection from creditors, the answer depends on the terms of the trust. Most trusts for personal injury compensation are bare trusts which means the trust fund is held for the sole benefit of the compensated person. The beneficiary of a bare trust can usually bring the trust to an end at any time and may have the ability to add and replace trustees. This level of control contrasts with a discretionary trust where a group of beneficiaries may or may not receive money from the trust.
Whether you disclose the trust to your creditors depends on the process you are involved in. If you are making an arrangement with creditors they are entitled to expect full disclosure, as would a Court if Court proceedings have been issued against you.
There is no automatic rule that you must inform others you have received compensation, the benefit agencies being the exception.
If interest is being charged on what you owe it might make sense to pay off the debt from the trust fund.
I have just received payment of a lump sum (312,000) after a very serious car accident. I currently work part time as I have a toddler. Myself and my partner get working tax crefits and family tax credits.
The money will be needed in the future to help pay for surgery to mend my damaged spine so I obviously dont want to use it to live on.
can you please advise what I need to do.
Tax credits are based on your taxable income and take no account of your savings or capital position. Income from a personal injury trust is not taken into account against tax credits – see our advice.
If properly invested a sum like this should produce significant income which made bring your tax credits to an end. That is the first reason to set up a trust for the compensation.
The main reason I recommend a trust when you are going to hold compensation for a number of years is that you simply do not know what the future holds. The sensible approach is to set up a trust now and then you know that if means-tested benefits are necessary in the future you can claim them and the compensation will not be taken into account.
I do not know your property position. Some compensated people pay off their mortgage or but a house. There is great sense in the trust owning the property as it must then be ignored should you ever need care through your local authority.
That may all feel over the top and you might ask why can’t I set up a trust if I need one. The answer is that a trust should be set up within one year of receipt of the first compensation payment.
many trusts are set up late and the time limit point is not taken, but the benefit agencies are sharpening their act. I would suggest you set up a trust now as you simply do not know what the future looks like.
I have a personal injury trust set up and the trust owns a house. I am currently unemployed and need to complete a HC1 for help with prescription costs. Do I have to declare the house?
You can claim for help with health costs if you are already in receipt of means-tested benefits such as income support, income-related employment and support allowance, income related jobseekers’ allowance, or tax and pensions credits. If you are unemployed I anticipate you are claiming one of these benefits and that will make the right to NHS help automatic.
It is interesting that ownership of a house is not a factor when assessing your entitlement to means-tested benefit, The only time a house comes into account is you are seeking local authority financial support for residential care.
My Mother has just received a lump sum of compensation for a fall she had of £30,000. Following your advice I have arranged a trust fund to be set up. Reading more I see you say it must be declared to the Tax Office. She is 83 and pays no tax at the moment being only in receipt of her pension and a small additional pension from her deceased husbands work. Her savings at the moment are barely £6000. How does she claim and is she declaring the whole lot in one go or an annual amount of what she uses of it?
As I understand the position your mother has set up a trust to hold compensation and I guess she has also set up a separate bank account.
It is necessary to give notice of the trust to any agency from which means tested benefits are being received.
There is no need to give notice of a bare trust to the Inland Revenue, but a discretionary trust must be notified as a discretionary trust is taxable in its own right. If the “benefits” are paid through the Inland Revenue, and I think you may have in mind working tax credit, then the position is slightly different. Those “benefits” are based only on taxable income, and not capital. I suggest you only need to inform the Revenue of the trust if the income from the trust makes a difference to entitlement. See https://www.markthompsonlaw.com/personal-injury-trusts-and-working-tax-credits/personal-injury-trust-to-protect-personal-injury-compensation/ which explains the position for working tax credit.
If Pension Credit is being received, and savings do play a part in the entitlement question, then notice of the trust ought to be given to the DWP which administers that benefit.