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11 Oct 2021

Personal Injury

Wills & Probate

Protecting your Personal Injury payments

If you’ve been awarded compensation following an accident or injury, you may be wondering what to do next – especially if you’ve been awarded a large sum of money and you are worried about the impact it will have on your finances, family and your future.

Afonwy Howell-Pryce, associate in our Wills and Probate department, teams up with Partner and Head of the Personal Injury department, Victoria Smithyman, to answer some of the most common questions they face when it comes to Personal Injury trusts.

What is a Personal Injury Trust?

A Personal Injury – or PI – Trust is a way of ring-fencing the compensation you receive following an accident or injury, separating any funds from your current account or savings – known as your ‘capital’.

Your trust is managed by a number of aptly named ‘trustees’, who oversee all withdrawals from the account. All trustees appointed must agree to the release before you can access your funds.

If you’re anticipating a payment following an accident or injury, it’s best to establish a trust as soon as possible – and even before the compensation is granted to you. This means the money can be transferred directly to the trust account, avoiding any negative impacts on means-tested benefits or services.

What can I include within my Personal Injury Trust?

Although many PI trusts have just one source of funding, i.e. the money received following an accident or injury, you can also include the following sources of funding within your trust:

  • Compensation received from Criminal Injuries Compensation Authority (CICA) for injuries caused by an assault – find out more about CICA here (link to infographic).
  • Compensation from the Motor Insurers’ Bureau for injuries caused by an uninsured or untraceable motorist.
  • Armed Forces Compensation Scheme award.
  • Charitable or public donations.
  • Payments for accident or travel insurance.

If in doubt, it is best to consult a legal expert to avoid any accusations of ‘mixing’. This is when funds that are not attributed to the accident or injury are not clearly separated from other capital.

Why should I set up a Personal Injury Trust?

We touched on it briefly earlier in this blog, but one of the major benefits of setting up a PI Trust is that is enables you to remain in control of your day-to-day finances.

If you receive any means-tested benefits, such as Jobseeker’s Allowance, Housing Benefit or Council Tax Support, a PI Trust will ensure that these are not impacted regardless of the amount of compensation you receive.

However, if you were to hold the money from your accident or injury in a regular current or savings account, it may be that your finances are reassessed and you are thought to have more than the government determines is needed to live on – resulting in a reduction or suspension of payments.

A PI trust can also safeguard some of the most vulnerable people following an accident or injury. A PI trust established on behalf of a child, for example, ensures that funds are utilised appropriately, as all trustees must authorise the transactions within the trust. As a young person matures and starts to make their own decisions about the future, they may also benefit from the advice and guidance of their nominated trustees, who are likely to have a wealth of life experience and a continued interest in the wellbeing of the child.

Put simply, a PI trust offers a layer of protection against many of life’s uncertainties, including divorce, declining health and bankruptcy.

How do I set up a Personal Injury Trust?

You will need a minimum of two nominated trustees (but no more than four), who are over the age of 18 and deemed capable of fulfilling their responsibilities. We’d advise having three trustees, as this ensures that decisions are always made as a majority.

It’s worth dedicating some time to thinking about who will act as your trustees, as they will effectively exercise complete control over the trust, so you will need to pick people who have your best interests at heart.

You will also need a bank account or building society to hold the funds, but you do not yet need to have the money available to place within the trust – in fact, it’s best to set up the account before any payments are made.

Because a PI trust crosses many aspects of legislation, from personal injury to probate, it is advised that you seek the guidance of an experienced legal firm to assist you.

If you’ve suffered an accident or injury that wasn’t your fault, speak to our expert personal injury team who can help you find out if you’re eligible to make a claim. Get in touch today via phone (01633 244233) or send an email to hello@hevans.com.

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