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Personal Injury Trusts

When an injured party is paid compensation t here is a possibility that the compensation may impact on the injured party's current and/or future entitlement to social security means tested benefits.

Some examples of means tested benefits are income support, housing benefit, council tax benefit or local authority support.

If an injured party receives welfare benefits they should notify the people who deal with their benefits claim of any change of circumstances.

It may therefore be in an injured party's interest to have compensation paid into a Personal Injury Trust to protect their benefits. Under social security regulations the value of a trust fund set up out of money paid as a result of a personal injury (a Personal Injury Trust) is ignored for most benefit purposes.

Social security benefit legislation is quite complex and if an injured party receives a number of benefits now or at some time in the future, the receipt of capital is likely to affect each benefit in a different way.

If an injured party deliberately rids themselves of compensation in order to claim or increase their benefits, they are treated as still possessing the compensation for social security benefit purposes. This may include the purchase of personal possessions, expensive holidays and/or carrying out repairs and improvements to the home.

In addition to this if an injured party intends to pay off debts which are not required to be repaid by law immediately, for example family IOUs, the injured party may be seen as deliberately depriving themselves of capital. This could also include credit cards, general loans and mortgage.

If a personal injury trust is set up the injured party can continue receive and/or claim in the future means tested benefits.

Trusts can be set up to allow an injured party to have access to the compensation when needed.

It is always best to set up a trust at the earliest opportunity so that there is no uncertainty over the status of the compensation i.e. to be able to prove the money going into the trust is in fact part of the personal injury compensation.

If you would like further information, contact Isabel Elliott on 020 8300 9321 or email ielliott@wmk-law.com, alternatively Contact Us.

This article is intended for general interest, it is not intended to constitute legal advice or to be a definitive analysis of the law.  Readers should seek legal advice on the issues raised before taking any action.