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There are many different Trust arrangements that can be used to safeguard the interests of vulnerable people. With a Personal Injury Trust, any compensation awarded for personal injuries and held in Trust is not counted when determining your entitlement to means-tested state benefits. It’s a perfectly legitimate arrangement accepted by tax and other authorities. but there are several different types of Trust. It is important that the right type is set up and that any Trustees fully understand their duties.
A Personal Injury Trust (or any other kind of Trust) is created by signing a document called a 'Trust Deed'. The Trust Deed appoints people of your own choice - Trustees – to look after any compensation award on your behalf. Provided they have capacity as defined by the Mental Capacity Act 2005 there is no reason why the vulnerable person themselves cannot also be a Trustee.
Cases involving young children will involve the High Court and those involving people deemed to be ‘mentally incapable’ (as defined by the Mental Capacity Act 2005) require the Court of Protection to agree to the foundation of a Personal Injury Trust.
You have a ‘grace period’ of 52 weeks from the date you receive the first payment of compensation to establish a Personal Injury Trust. After that time, if you haven't set up a Trust, your award will count as capital when you are assessed by the DWP. Having that compensation money in the bank - even interim payments – could immediately reduce or suspend entirely any entitlement to means-tested state benefits and affect your ability to claim in the future. It is never too late to establish a Personal Injury Trust, but it can become more difficult over the course of time.
Normal expenses of daily living are supposed to be met by means-tested benefits and it may help a vulnerable individual to budget to continue to use these for their intended purpose. Compensation protected by the Personal Injury Trust can then be used meet any shortfall and pay for other things which are not met by benefits such as phone bill, the cost of extra care, holidays and much more. Any excess funds can be invested by your Trustees for your future needs.
A Personal Injury Trust must be administered and structured like any other Trust arrangement, which can take many forms, depending on which structure best suits the needs of the vulnerable client.
Whichever Trust structure seems best suited to your requirements, our expert legal help should always be sought to create and administer the Trust for you.
A person does not need to have specific expertise to act as a Trustee, but whoever you choose must be responsible. People often select family members but in many cases also having a professional Trustee is a good idea. You can select between two and four Trustees (including yourself if you have capacity) to make decisions about payments from the Trust but whoever is chosen, they should each have the ability to be objective and a willingness to act in your best interests at all times.
If there are no good individual candidates Professional or Corporate Trustees may be appointed (most often your solicitor). Naming two or more family members can spread out the burden and responsibility and can ensure that decisions will be made with joint input. On the other hand, if they don’t get along that can lead to fighting and deadlock.
Naming a trusted family member as Co-Trustee with your lawyer may be the better option offering a good combination of personal decision-making with legal expertise and access to other professional investment advice. This is such an important role - looking after the best interests of a vulnerable person who may be entirely dependent on others making decisions - that it’s worth seeking professional advice from our expert team and giving the appointment of Trustees a great deal of thought.