In this blog post, Heather Gaunt, an Associate Director at Thorneycroft Solicitors and the Head of our wills probate and trust department, shares her insight into some of the most common questions that both she and her team encounter relating to a personal injury trust.
In many cases, a personal injury trust may be vital, whilst advisable in others.
Below I’ll explain all the key points one must take into account when considering whether or not they should instruct their solicitor to create a personal injury trust.
What is a Personal Injury Trust?
A Personal Injury Trust can be set up to receive your personal injury compensation, making sure that you keep the right to means-tested state benefits following receipt of compensation.
Other reasons for setting up a trust could be to:
- Ring fence your compensation from friends and relations
- Protect the compensation from divorce or bankruptcy in the future
- Manage large amounts of money to make it last longer
- Protect the compensation from care home fees in later life
- Enable the funds to be available for your benefit through fluctuating mental capacity
- Protect the eligibility of other members of the household to claim means-tested benefits
Why do I need a Personal Injury Trust?
There are strict limits controlling the amount of savings or income you can receive whilst receiving benefits.
Without a Personal Injury Trust you run the risk of losing your entitlement to means-tested benefits now (or in the future if your circumstances change).
What can be done with the money in my Personal Injury Trust?
The simple answer is that the Trust can pay for anything that your state benefits are not supposed to cover: eating out, specialist/designer clothes, holidays, cars and running costs, home improvements, outstanding debts and phone bills.
The Trust should not pay for normal food, ordinary gas, electricity and water bills, ordinary clothes and day to day travel on public transport.
Who are Trustees?
Trustees look after your compensation award once it has been placed in a Personal Injury Trust.
They are chosen by you to act on your behalf and have a wide range of investment powers. You should choose at least two Trustees, you can be one of them if you wish.
What do Trustees do?
Trustees look after your compensation award and invest it for you.
They always act in your best interests and will take account of your wishes when deciding when to pay out money to you or for your benefit.
They can make direct payments to third parties for planned expenditure to avoid large payments passing direct into your personal bank account.
How do Trustees invest my money?
Your Trustees will transfer your compensation award into a new Trust bank account with access for your chosen Trustees.
This may be with your existing bank or with a new bank if that is not possible.
Thorneycroft Solicitors can put you in touch with an independent financial adviser to assist with this.
It is important that the Trust is created within 52 weeks of receipt of the first compensation payment.
What if I change my mind?
The Trust Deed can be revoked at any time and the compensation award returned to your control.
All you have to do is write formally to the Trustees requesting this. However, you will lose the protection given to your award.
Can new Trustees be appointed and removed?
Yes they can: the power to do so is in your hands.
For example, Trustees have to act by a majority decision – if there is a stalemate, you can appoint a new Trustee, who will have the casting vote or you can remove them and appoint another in their place.
How much will it cost me?
Thorneycroft Solicitors will charge £600 plus vat to prepare a personal injury trust.
Should you wish to appoint a professional Trustee, such as a solicitor, then you can agree future fees in advance.
If you would like advice on preparing a Will or Powers of Attorney we can assist with those documents too.
Our Private Client team are highly experienced in all matters relating to personal injury trusts.
We are also specialists in drafting other essential documents including wills and powers of attorney as well as handling probate matters.
If you would like to speak to a member of our team, please call us for free today on 0800 1979 345 or complete our online enquiry form by clicking here.
