The Benefits of a Personal Injury Trust
If you or someone you love has had life-changing injuries because of an accident, the injured person may receive a substantial amount of compensation from a personal injury or medical negligence claim.
If this happens, you will need to consider the best way to manage this money. One option is to manage this money through a Personal Injury Trust, the benefits of which we explain below.
For initial legal advice get in touch with our Wills and Trusts Solicitors.
What is a Personal Injury Trust?
A Personal Injury Trust is a legally binding arrangement, which holds and manages funds which have been received as a result of an injury. There are rules which determine the way that a Trust must be managed.
Personal Injury Trusts are managed by a minimum of two trustees or by a trust corporation. The Trustees should make decisions together about how to manage the funds.
Benefit: Your State Benefits will not be impacted
When a serious injury happens to you or someone in your family, this can impact your whole life. The injured party may no longer be able to work and members of their family may have to give up their jobs to provide care. However, living expenses will still continue. If you are in this position, it is likely that you will want to claim state benefits and care services. Some of these benefits are assessed on a person’s means (that is how much a person receives in terms of income and capital). Receiving compensation will often result in the injured party being in possession of a sum of money which makes them ineligible for benefits.
If the funds are held in a trust, when your entitlement to receive state benefits and services is being calculated, the compensation will be excluded from this calculation.
This is important because a person with life-changing injuries will often require additional care and home adaptations in addition to day to day needs. A personal injury trust ensures that the compensation award is disregarded in the assessment for eligibility for state funds thereby enabling the injured party to use their compensation for the reasons it was given rather than using it to replace state benefits.
For more information see Personal Injury Trusts and Means-Tested Benefits.
Whoever benefits from the Trust (known as “the beneficiary”), is also protected from any inappropriate use of the money.
Beneficiaries are usually vulnerable people, such as children, adults or elderly people.
The way a Personal Injury Trust works is that multiple Trustees are appointed to manage the money in the Trust. Each and every amount that is spent is considered by the Trustees to ensure that it’s spent wisely and that the fund is managed to secure the Beneficiary’s long term interests. This protects the funds from being spent inappropriately.
It is extremely important that the money held in the Trust is spent carefully. This is because it will usually need to provide for the injured party for the duration of their life; and the Trustees will need to make sure that there is enough provision within the fund to continue to provide care for the injured party.
Use the Trustees Expertise
Selecting the right Trustees for your Personal Injury Trust is important. You can use their knowledge and expertise to make sure that your money is managed effectively; so that it stretches as far as possible and allows you and your family to gain the most benefit from it.
Your long term interests are very important. You may need to appoint a specialist Wills and Trusts Solicitor to be a Trustee as they can use their professional knowledge and insight to make sure the large sums of money are used wisely.
Ring Fence the Compensation
A Personal Injury Trust will allow you to separate the compensation you receive from all your other assets. Your circumstances, or those of your family, may change in the future. By keeping the money from your compensation separate from everything else, this can help to define eligibility for any means-tested benefits or services.
So you can see, there are a number of benefits to setting up a Personal Injury Trust where you have received a large amount of compensation.
You will need specialist legal advice from a Wills and Trusts Solicitor on whether you can set up a Trust and the nature of Trust that is suitable so we recommended that you speak to one of our friendly Solicitors and they will help you.
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