A Personal Injury Trust can ensure that a person who receives a large personal injury compensation settlement remains eligible for any state benefits they’re claiming.
Many people make personal injury claims for injuries that they have suffered; from falls on an uneven pavement to serious brain injuries following road traffic accidents. But in some cases, the amount of compensation received can be life-changing and if necessary, steps should be taken to safeguard it.
As matters stand, if a claimant were to be paid their compensation straight into their bank account, this could adversely affect their continued receipt of any means-tested state benefits they might receive.
For example, if the recipient of the compensation were to receive Housing Benefit, Employment and Support Allowance, Job Seekers Allowance, Pension Credits or any of other means-tested benefit, their receipt of them would be at risk when receiving the lump sum of compensation.
The recipient must therefore tell the Department for Work and Pensions (DWP) that they have had this money. A failure to do so could lead to an “under caution” interview by the DWP and the possibility of criminal prosecution with benefits, sanctions and possibly even imprisonment to follow.
However, it’s also important to realise that a claimant has a period of 12 months from the receipt of any compensation to the date of that reassessment. From the DWP’s perspective, the claimant is in receipt of the compensation as soon as the money arrives in their Solicitor’s client account.
If, over that 12-month period, it’s possible to use the compensation for a reasonable purpose (most typically discharging debts or paying off a mortgage), the DWP may not see that as a deliberate misuse of funds and therefore allow payment of benefits to continue. If, however, the money is frittered away (for example, on expensive holidays or a sports car), the DWP might take a different view.
The purpose of a Personal Injury Trust, therefore, is to remove this degree of uncertainty. Once the money has been paid into a properly constituted Personal Injury Trust, it’s essentially “invisible” as far as the DWP is concerned for the assessment of eligibility for benefits.