Does Personal Injury Compensation affect Benefits?
Yes. However, this can be prevented by setting up a Personal Injury Trust, also known as a Compensation Protection Trust, where your compensation can be held. Once held in a Personal Injury Trust, it cannot be considered in any assessments for means tested state benefits.
Compensation and State Benefits
Thousands of people are injured every year in England and Wales as a result of personal injury or medical negligence. If this has happened to you, then you could be entitled to compensation.
However, many people are often reluctant to make a claim for compensation because they don’t want the compensation to have an impact on their current state benefits.
It’s imperative to consider the impact if you’re currently receiving benefits or will be applying for any of the following benefits:
- Universal Credit
- Housing Benefit
- Income Support
- Income based Job Seekers Allowance
- Income related Employment Support Allowance
- Council tax or reduction
- Pension credit
- Medical Benefits such as free Prescriptions, eye tests etc.
The law currently states that if you have savings of £6,000 or more, then you’ll be at risk of losing some of your benefits. And if your household has savings of £16,000 or more, then you’ll be at risk of losing all of your benefits.
You will also need to consider that if your compensation is above the £16,000 threshold, then you’ll be at risk of losing your free medical benefits.
How to Prevent This
If you’re currently in the process of applying for the above benefits, then the first 52 weeks of any personal injury or medical negligence compensation paid to you is not considered when assessing your entitlement to benefits. However, it’s worth noting that the 52-week rule only applies in exceptional circumstances, for example, interim payments of compensation or insurance.
In order to prevent this, you can set up a Personal Injury Trust, which is also known as a Compensation Protection Trust, to store your compensation, which means it can’t be considered when your eligibility for means tested state benefits is being assessed.
How to Set Up a Personal Injury Trust
Firstly, you’ll need 2 people who are willing to act as Trustees and who would have control over the compensation. A Personal Injury Trust is similar to any other bank account and your compensation will be transferred into it in the exact same way.
However, the money in the Personal Injury Trust must come solely from the compensation that you are awarded and no additional funds can be added. Small, irregular withdrawals can be made from the Trust to remain eligible for benefits, and you need to ensure that these are below the savings limits.
The Trustees also have legal duties and must be at least 18 years of age. The Trustees must be individuals who you trust and haven’t had a history of money problems. Since the compensation is not the Trustee’s money, it won’t affect their benefits, tax position or anything income-related.
It can take several months to set up a Personal Injury Trust, so we recommend getting in touch with us before you receive your compensation, so our specialist Court of Protection Solicitors and/or Private Client Lawyers can guide you accordingly.
Our Court of Protection Solicitors will assist the Trustees to set up a separate bank account, in which they can deposit the compensation payout. Once the compensation is in the Trust, it can be accessed with consent of the Trustees.
However, you must approach with consideration and ensure that any withdrawals made don’t place your household income above the savings threshold - as discussed above - for means tested benefits. The money held in a Personal Injury Trust will usually be taxed in the same way as savings, and the type of Trust you need depends upon your individual circumstances. For more information get in touch with our Court of Protection Solicitors.
Can a Personal Injury Trust affect Care Fees?
Should you need to move into a care home, a Personal Injury Trust can help safeguard your compensation and ensure you don’t have to use it to fund your long-term care home fees. If you have any questions in relation to care fees, our specialist Care Home Fees Solicitors can help you.
For free legal advice call our Medical Negligence Solicitors
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