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PERSONAL INJURY TRUSTS: What are they & could you benefit from one?

View profile for Kimmo Boote
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A PI trust is a legal arrangement whereby Trustees manage compensation on behalf of the successful claimant, so that the claimant can retain their entitlement to means tested benefits, and also minimise any contribution towards the cost of ‘community care support’ which is provided by their local authority.

Which benefits are means tested?

For people under pension age, these are:

Income Support, Jobseeker’s Allowance (JSA), Employment and Support Allowance (ESA), Housing Benefit and Council Tax Support.

From April 2013, Universal Credit is being phased in to replace Income Support, JSA, ESA, Housing Benefit, Child Tax Credit and Working Tax Credit.  

For pensioners, these are:

Pension Credit, Housing Benefit and Council Tax Support.

So do I need a Trust?

If you fall into one of the above categories, and wish to protect your benefits entitlement and/or community care funding in the future, then it would be advisable for you to set up a PI Trust.

How does the amount I have in the bank (capital) affect my entitlement to means tested benefits?

The general rule is that the first £6,000 is disregarded. Between £6,000 and £16,000 a claimant’s entitlement will be reduced on a sliding scale of £1 per week reduction on every £250 above the £6,000 threshold. Therefore, capital of say £10,000 would result in a weekly reduction to benefits of £16.00.

If the capital exceeds £16,000, the claimant will not be entitled to any means tested benefits.

What is the 52 week disregard?

The first payment that you receive in a personal injury or clinical negligence claim will be disregarded for a period of 52 weeks, no matter how much the sum is for. Essentially this means that (in the absence of any interim payments) you will have up to 52 weeks from receipt of the compensation to set up a PI Trust. During this 52 week period, you can only spend the compensation on things that the authorities will deem to be reasonable, otherwise the authorities can still reassess a claimant’s benefits, if they believe that the claimant deliberately deprived themselves of capital so as to continue to be eligible for means tested benefits.

What is a Trustee?

A trustee is a person that you choose to look after your funds in the Trust. They ‘vet’ what you spend the money on, and they need to consent to the advance and it’s proposed use. There needs to be a minimum of 2 Trustees, and you can be one of the Trustees yourself. The Trustee(s) that you nominate must be over 18, and can be a family member or a friend. You must be able to trust them implicitly, and you should envisage having regular contact with them indefinitely.

I am only intending to provide a broad overview of PI Trusts in this article, and there is much more to this subject than the words written here. If you require further information on PI Trusts, or Clinical Negligence claims generally, please do not hesitate to contact Kimmo Boote on 01202 315005 or k.boote@duttongregory.co.uk.