This is why many people set up a ‘Personal Injury Trust’ when they receive an award. Whilst it may sound a little odd, a trust is essentially an umbrella that protects the compensation from the outside world.

What is a Personal Injury trust?

A Personal Injury Trust is a protective umbrella created by a person that receives the award (the ‘settlor’). To set it up, they need to sign a special document called a ‘Trust Deed’. The money from the award, and any property that is bought with the award, will be held inside the trust and legally belong to the trust.

The people who look after the money for the person that receives the aware are called ‘trustees’. The person who sets up the trust can choose who the trustees of the trust are going to be. They can include the settlor if there are two or more trustees to act with them, or they can appoint friends, family members, and / or a professional.

The trustees can only use the trust money in the trust for the benefit of the settlor.  The money technically belongs to the trust, but it can only be used to help the settlor. How this works in practice is that the trustees invest the money on behalf of the settlor, and give them money on a weekly or monthly basis into their own bank account so that they can pay bills and have spending money, like normal.

A Personal Injury Trust may be brought to an end at any time by the settlor.

What are the pros and cons of setting up a Personal Injury Trust?

The major advantage is that by putting the award money into a Personal Injury Trust, the funds will be ignored for means assessment and Local Authority care funding. This is accepted by the Government. However, this must be done within 52 weeks of receiving any money as a result of the award, and the award money must have been kept separate from other money that the injured person may have, otherwise it can cause real difficulties.

Another advantage to setting up a Personal Injury Trust is that it means the injured person doesn’t have the burden of having to manage and invest potentially large sums of money. This will be done by the trustees.

The funds in the trust are taxed just as if they belong to the settlor personally and form part of their estate when they die.

Most people see the main disadvantage of having a trust in place is the fact that the money doesn’t belong to the injured person anymore. However, it must be kept in mind that they can only be used to benefit the injured person, and the trust can be brought to an end by them at any point.

Another concern that people have is that of cost. The set up costs are very modest compared to the value of the trust – they are usually around £500 to £900 plus VAT. If the settlor wants a professional trustee, there will also be professional costs for running the trust too. However, the professional trustee will often bring great value to managing the trust, particularly if there are large sums or a large care team to manage.

Protecting your compensation via a Personal Injury Trust is a quick and easy, and it means that your compensation is protected and you can continue to receive state support for the rest of your life.

Article written and contributed by Enable Law

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered above, please speak to Enable Law directly