When you receive your compensation you will probably just want to get on with your life.
As part of this process, we recommend that you consider protecting your compensation through a personal injury trust:
- Your compensation need not cut your means-tested benefits. By setting up a Personal Injury Trust, you are able to receive your compensation and retain your means-tested benefits entitlements indefinitely. This is perfectly legal and acceptable to both the Department of Work and Pensions and Local Authorities. The Regulations treat Personal Injury Trusts in a special way so that you are able to retain entitlement to your means-tested benefits. But, the special rules only apply if you decide to 'opt in'. This means setting up a Personal Injury Trust.
- Your compensation can be protected from the cost of long-term care fees when you get older. Even if you do not get means-tested benefits now, the ability to retain means-tested benefits as well as your compensation can be of great value to you and your loved ones in the future.
- Your care at home. Care in your own home (as opposed to in a care home, supplied by a Local Authority) is subject to Local Authority discretions as to the factors upon which they base their charges. But, in our view, they should disregard your compensation award if it is placed into a Personal Injury Trust under the Fairer Charges Guidance.
- Your compensation can be protected for you and your family. If, at some point in the future, you are unable to look after your compensation yourself, you have the peace of mind of knowing that your Trustees will look after things for you and your loved ones.
Why choose Shoosmiths?
- Specialist advice – you need specialist advice to get the best deal for you and your loved ones. Our specialist Private Client Team will work with you to ensure that you secure the best deal after you receive your personal injury award.
- Financial matters – we can work with you and your independent financial advisor to help you to secure the best possible financial security after you get your compensation.
- What do you need to do when you have your compensation? If you place your compensation into a Personal Injury Trust, you can decide how much income is needed to pay your outgoings. Your compensation monies can be invested in the trust for you. We can also prepare a Will for you as well as other protection for you and your family as part of a package deal, if you wish.
Things to think about
What is a Personal Injury Trust?
Your Personal Injury Trust is created when you sign a special document called a 'Trust Deed'. The Trust Deed appoints people (chosen by you) who will look after your compensation on your behalf. They are called 'Trustees'. You can be a Trustee if you wish. The Trust Deed also sets out how the compensation monies should be applied for your benefit.
Why should you bother?
- If you receive compensation, even an interim payment, it will tend to cut your means-tested benefits. This is certainly after the twelve months 'period of grace' ends and sometimes sooner. The period of grace is based upon complex legal provisions and our advice is that you should not rely upon it. That is especially if (like most people) you want to retain some of your award for any unexpected expenses in the future.
- Remember that your compensation may cost you more than you think if you do not put a trust in place. It may cut your present entitlements and also your ability to claim in the future. Not having entitlement to means-tested benefits can also stop you being able to obtain other valuable services such as free prescriptions and school dinners for children.
- Even if you do not get means-tested benefits right now you might want to protect your compensation from the growing cost of long-term care. This is a big concern for many people. Why miss out when the rules allow you to retain your entitlements if you create a Personal Injury Trust?
What can you do with the money in the Personal Injury Trust?
- Your normal expenses of daily living are supposed to be met by means-tested benefits. This is things such as gas, water, electricity, food, mortgage interest, council tax, most rents and payments for any residential care. These should usually continue to be met by your benefits (so far as possible) because that will help you budget properly. But, if there is a shortfall, these bills can be met by the trust (e.g. if you get an unexpectedly large heating bill).
- Other things which are not suppose to be met by benefits such as your phone bill, TV costs and the cost of extra care should be met from the trust. The trust can also pay for a place to live, a new car, petrol, a holiday and much more. You can decide how best to use the trust monies. Any excess funds can be invested by your trustees for your future needs.
Who should you choose to be your trustees?
- You need to choose between two and four Trustees to look after the compensation you put into the trust and make decisions about payments from the trust. We suggest you choose a family member and a professional person. We can be trustees if you wish.
- Your choice of Trustees is very important. Payments are subject to your consent. Trustees must take proper investment advice. You can have the power to remove and appoint new Trustees if you want. In many cases having a professional trustee is a good idea. The trust can be wound up if necessary although that may trigger loss of benefits.
Other recommended steps
- Important – you are probably aware of the need to make a Will to cover what happens to your own assets on death. But, if you create a Personal Injury Trust with a view to protecting your entitlement to means-tested benefits, it is important that anyone (family members or otherwise) who wishes to leave monies to you under their Will also has proper advice. Otherwise, you could find that an inheritance you receive under that person's Will leads to you losing your means-tested benefits. This can be avoided by the person who wishes to leave you something having proper legal advice on the precise wording of their own Will.
- Bring your Will up to date to look after your loved ones. We can create a Will for you (or review an existing Will) at the same time as creating your Personal Injury Trust. Depending on the type of Personal Injury Trust chosen, the Trust monies may fall into your Estate on death and pass under the terms of your Will. We can provide advice on your individual circumstances. Terms are agreed individually according to need, but Wills are generally inexpensive.
- A special discount offer – if we create a Personal Injury Trust for you and prepare your Will at the same time, we are pleased to offer you a 5% discount on the fees due to Shoosmiths from Shoosmiths. This discount applies to your own Will and to any Will made by any family member who wishes to leave any part of their estate to you (see paragraph 1 above).
Lasting Power of Attorney (LPA)
- Avoid problems the easy way – an LPA can be arranged at the same time as creating your Personal Injury Trust. Making an LPA enables you to appoint persons (Attorneys) to look after any property & investments that are not already held within your Personal Injury Trust.
- A Lasting Power of Attorney is vital if you become mentally or physically incapable. It is a common misconception that your spouse/partner will be able to look after your financial affairs if you are unable to do so yourself. Unless you take the precaution of making an LPA, you may find that a spouse/partner has to obtain a Court Order to enable them to sign on your behalf. If you would like any further advice about this, please ask.
- A special discount offer – if we create a Personal Injury Trust and prepare your LPA at the same time, we are pleased to offer you a 5% discount on the fees due to Shoosmiths from Shoosmiths. This can be extended to LPAs made by any of your family members
Independent Financial Advice
- We do not provide financial advice.
- We can introduce you to an independent financial adviser or assist your existing advisor. It is important to get high quality independent financial advice. We would be happy to introduce you to a suitable advisor. If an employee of Shoosmiths is a trustee of your Personal Injury Trust, we will appoint an independent financial advisor of our choice unless you have an existing independent financial advisor who has the appropriate qualifications and specialist knowledge to satisfy our requirements.
Tell us what you think
All documents should be read and used in accordance with the terms and conditions. This document is for your general information only and is not a detailed statement of the law. It is provided to you free of charge and should not be used as a substitute for specific legal advice. If you require specific legal advice please contact our client services team on 03700 868686.
For more information regards personal injury claims get visit our personal injury claims section today.
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024