Tuesday, 11 October 2011

Personal Injury Trusts - Frequently Asked Questions

Article by
Sharon Brown
What is a Personal Injury Trust?
A Personal Injury Trust is a legal document which allows any compensation you receive as a result of an accident to be disregarded when you are assessed for means tested benefits.
Also, if you believe you may need to go into residential care in the future then setting up a personal injury trust can protect your compensation from being used to pay your care fees.
State support is designed to assist people when they need it, and therefore with careful planning it is possible to retain your compensation and maximise state support.

Are there other ways to protect my benefits?
No. However, personal injury trusts are also commonly known as other names:
> Compensation Protection Trusts
> Compensation Protection Plans
> Benefits Protection Trusts
> Special Needs Trusts

What are means tested benefits?
They are benefits paid by the Department for Work and Pensions (DWP, formerly known as the DSS) and the Local Authority, who often use the same rules when calculating your entitlement.
A ‘means test’ is when the DWP or Local Authority assess how much money you have in order to determine your eligibility for certain benefits.

Examples of means tested benefits include:
> Housing Benefit
> Council Tax Benefit
> Income Support
> Tax Credits
> Employment Support Allowance
> Local Authority care and support
> Free prescriptions

What amount of money would affect my entitlement to benefits?
Most benefits start to be reduced if you have capital of £6,000 or more. If you have over £16,000 then the likelihood is that you would lose all means tested benefits.

What happens if the capital is put into a personal injury trust?
The DWP or Local Authority will only consider other capital that you have, and will ignore the money in the Trust. This means that you can benefit from your compensation without losing your source of income. Also, any assets bought using trust funds are disregarded, for example a property.

Is the capital still mine?
Yes. Technically, the trust owns the capital, but you own the trust.

Who controls the capital in the trust?
When setting up the trust, you will need to choose at least two trustees. This can be yourself and your partner, a friend, or anyone else who you trust. The trustees then control the trust, but have no obligation to tell anyone else about it or reveal your personal details. The trust will then have its own bank account, where funds can be withdrawn with the agreement of the trustees.

Many people choose to appoint a professional trustee (such as your solicitor), particularly if there is a substantial sum of money involved. We can help you decide whether this would be beneficial for you based on your individual circumstances, and if so we would be happy to act as one of your trustees.

Does the capital have to be invested?
Depending on the level of award you receive you may or may not need investment advice. If the award is fairly small then it may be sufficient for the funds to be put into a bank account. If the award is quite substantial then it may be wise to look at investing at least a portion of the funds, and we can recommend a financial adviser who will discuss your specific needs with you.

Are there rules on what I can spend my money on?
There used to be strict rules and regulations governing what you could do with the money, but thankfully these have now been removed and you can spend the money on anything you choose.

Are there tax implications?
If a standard personal injury trust is created, there are no special tax rules that you need to be aware of. Your personal tax position remains the same as it would have been without the trust.

Do I have to tell anyone about the trust?
Yes. You have a duty to inform the DWP and Local Authority of any change in your circumstances, and this includes a compensation award. However, we will notify them for you and explain that the money in the trust is to be disregarded for the purpose of assessing your entitlement to means tested benefits.

For more information or to discuss your personal circumstances please contact Patricia Ling by email - patricia@gardenhousesolicitors.co.uk or Sharon Brown by email - sharon@gardenhousesolicitors.co.uk or telephone the office on 01992 422128.

http://gardenhousesolicitors.co.uk/Tel: 01992 422 128

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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