Types of Personal Injury Trust Fund
We are going to look at the two types of Personal Injury Trust Fund you could use to invest your compensation money
Bare Trusts
In a Bare Trust, the compensation money is in the name of the trustees. The trustees essentially look after this compensation until the beneficiary is over 18 years old. At this point, the beneficiary ican manage their own trust. This is a good option for when you are setting up a Personal Injury Trust for a child, who will be able to make their own financial decisions when they Reach the age of majority.
Discretionary Trusts
A Discretionary Trust is when the trustees can decide on what happens with the assets – or in this case, compensation – and how it is used. These trusts can be used if the beneficiary needs help deciding what to do with the compensation. This is ideal if you are setting up a Personal Injury Trust for yourself or another person who does not feel able to make financial decisions, for whatever reason.
Do I Need a Personal Injury Trust?
Now that you know a little bit more about what exactly a Personal Injury Trust is and the types of trusts available, it is worth asking yourself if you need a Personal Injury Trust, and whether it is the right decision for you.
There are a few things to think about. Firstly, consider whether you need a Personal Injury Trust without effecting any means-tested benefits for day-to-day costs. Secondly, it is worth understanding how Personal Injury Trusts can help you make the right financial decisions in terms of what to do with your compensation money.
If you are wondering if getting a Personal Injury Trust could be right for you, contact our friendly and knowledgeable team of solicitors. We can help you understand the benefits of getting a Personal Injury Trust and whether this is suitable for yourself.
What Funds Can Go into a Personal Injury Trust?
You may think only compensation goes into a Personal Injury Trust, but this is not the case. Overall, the funds that a Personal Injury trust can be used for are:
- Personal Injury compensation;
- Insurance payments;
- Government compensation scheme money.
It is important to understand exactly what funds are permitted to be invested - into your Personal Injury Trust. to avoid losing the protection and benefits a Personal Injury Trust give you.
At Simpson Millar, we can talk you through the terms around a Personal Injury Trust, the funds that go into it and to how you can use the money. Personal Injury Trusts do not have to be difficult or confusing to set up and use, once you know how they work and what the restrictions and limitations are.
Benefits of a Personal Injury Trust
There are several benefits of using a Personal Injury Trust. These include:
- Every decision you make will be approved by Trustees, meaning you have always got a professional acting in your best interests;
- With the help of the Trustees, you can decide how to use the money you have been awarded to help with your treatment and/or healing;
- You can still be eligible to get any benefits you may rely on from the government, even if they are means-tested;
- The Trustees can make financial decisions for you, alleviating any stress you may have.
Setting up a Personal Injury Trust
There are two main steps involved in setting up a Personal Injury Trust, both of which require a lot of time and thought. These are:
- Appointing trustees: When you are setting up a Personal Injury Trust, you will want to appoint trustees you trust – as the name suggests. Depending on what type of Trust you decide to set up, your Trustees will have a big part in deciding what happens to the money in your Trust, which is why you need to be sure they will make the right decisions, and ones which are in your best interests.
- Preparing a trust deed: Trust deeds lay out all rules, regulations, and information about your Personal Injury Trust. This means that everything you have decided on and discussed will then be set out and written down, into a legally binding document.
It is vital you have a Solicitor with you during these stages, to ensure you understand the process this way, you will be able to make fully informed decisions when setting up your Personal Injury Trust.
At Simpson Millar, our team of solicitors can walk you through setting up a Personal Injury Trust, so you can understand the full process and how it works. In addition, we can ensure you understand the terms and limitations that apply to this kind of Trust Fund.
When to Set Up a Personal Injury Trust?
Generally, it is advisable to set up a Personal Injury Trust before you receive your compensation. This way, the money goes into the Trust from the outset minimising any issues that may arise when assessing your eligibility for means-tested benefits and funding.
While you can set up a Personal Injury Trust after getting your compensation, this does have limitations. For example, you are unable to claim back any benefits you did not get before the Personal Injury Trust was set up.
Can I set up a Personal Injury Trust Myself?
You might be worried about the cost of setting up a Personal Injury Trust, especially when it comes to getting help and advice with the process.
When you are setting up a Personal Injury Trust, you will need two Trustees, and they usually must be professionals. This is because they need to have the knowledge and expertise to properly advise you on managing your compensation.
In addition, getting a Solicitor to help you with the process of getting a Personal Injury Trust can be beneficial to ensure you are making- the right decisions and go down the appropriate legal routes.
Who should I choose as my Trustees?
As we have already touched on above, your Trustees should be people you trust, who you know are able to make the right financial decisions in your best interests.
Usually, Trustees are professionals, like Specialist Solicitors, who take full control of the money in your Trust, to ensure the funds are used to support your future and/or help you recover from your injury.
As the person setting up the trust, you can be one of your Trustees, but you need one other professional and independent Trustee. This person will be tasked with helping you decide what happens to the funds in your Personal Injury Trust.
Can I Request a Personal Injury Trust for Children or People who are Unable to Make Their Own Decisions?
You are certainly able to request a Personal Injury Trust for either a child or a person who are unable to make their own decisions.
If the Personal Injury Trust is for a child, a Bare Trust, where the child will be able to control the money when they turn 18 would be recommended. This is ideal if you know that the child will be able to make the right financial decisions once they turn 18, at which point, they will have full control of the funds.
If the Personal Injury Trust is for an adult who is (for whatever reason) unable to make decisions for themselves, a Discretionary Trust would be recommended, so the Trustees control the money. There are several reasons as to why people are unable to make financial decisions, ne being lack of financial knowledge – therefore it is important to have a Trustee who is an expert in Personal Injury finances.
What are the Conditions Required by DWP for a Personal Injury Trust to be Accepted?
There are a few conditions which the DWP requires, so that a Personal Injury Trust can be accepted. These are as follows:
- Two Trustees: There should be two Trustees, one of them is required to be an independent party. The beneficiary can be the other Trustee, if preferred.
- Bank Account: The money should be kept in one separate bank account, which should be labelled to show it is the Personal Injury Trust.
- Meeting Minutes: When the Trustees meet, meeting minutes should be made available when they are discussing what will happen to funds in the Trust.
It is important to understand these conditions, so you are fully aware of what you need to figure out before getting a Personal Injury Test.
How can Simpson Millar help with Personal Injury Trusts?
At Simpson Millar, we can help you ascertain whether a Personal Injury Trust is beneficial for you. As explained above, when acting for you on your personal injury claim, we will also consider whether a Personal Injury Trust applies. We can explain the benefits and limitations of a Personal Injury Trust, tailored to you.
If we decide together that a Personal Injury Test is right for you, we can guide you through the process from choosing your trustees to creating a Trust Deed or Document.
We will explain the entire process and everything that is required so the trust can be set up ready for when payment is received.
FAQs About Personal Injury Trust Funds
How long do I have to set up a Personal Injury Trust?
While there is not a limit on how soon you need to set up a Personal Injury Trust, we would recommend setting it up before you receive your compensation. If this is not possible, it is best to do it within a year of getting your first payment.
How much will it cost?
There is no fixed cost, as such, for setting up a Personal Injury Trust. Of course, this will depend on the circumstances of your case.
How many trustees do I need?
For a Personal Injury Trust, you need two Trustees, but one of them can be you, providing the other is an independent professional.
What is the role of the trustee?
The Trustee is there to manage your assets – in this case, they will take care of the compensation and what this money goes towards.
Is a Personal Injury Trust Right for me?
This completely depends on your situation. If you are looking for help with financial decisions, or if you rely on means-tested benefits, a Personal Injury Trust could be right for you.
Are there any alternatives to setting up a Personal Injury Trust?
There are several alternatives, including setting up a deputyship account, which is when someone – known as a deputy – manages your money for you.
What can you include in your Personal Injury Trust?
You can include anything to do with your compensation or personal injury in your Trust, including your compensation, insurance payments and government compensation scheme money.
How exactly do you use a Personal Injury Trust once it has been set up?
If you are just a beneficiary, and not a Trustee, you can let the Trustees manage it for you. If you are one of the Trustees, you can decide with your other Trustee on what to do with the money and how to use it.
What happens when I take funds out of a Personal Injury Trust?
It is best not to take funds out of a Personal Injury Trust, because when you do, you lose the protections the Trust gives you.
What will happen to my Personal Injury Trust after I die?
When you pass away, the money that is in your Personal Injury Trust will be considered part of your estate, and it will therefore be subject to Inheritance Tax (IHT).
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