Josephine and Amy explain value of personal injury trusts for abuse survivors

What is a personal injury trust?

A personal injury trust is a simple type of trust fund. It is a legally binding arrangement for holding and managing funds received as a consequence of an injury to the person (such as money received to compensate for personal injury following a successful civil damages claim or application to the CICA).   The main benefit (see more below) is that it enables you to receive your compensation and still continue to claim, now or in the future, state means-tested benefits or services, which otherwise you might be no longer entitled to claim.  It is perfectly legal and standard to set up a personal injury trust for this purpose.   

The process of setting up a Personal Injury Trust involves opening a separate bank account for the money, which is held in the name of the trust for the benefit of the person whose money it is. The person to whom the money belongs is known as the ‘beneficiary’. At least two trustees must be appointed to manage the trust, who are responsible for looking after the trust fund for the benefit of the beneficiary. The trustees make decisions together about how the money is managed and used, including any payments made out of the trust. One of the trustees can be you if you have mental capacity to manage your own finances. 

The trust must be managed according to specific rules. It is important that the right kind of trust is used, suitable for the person's circumstances. The setting up of a personal injury trust will involve some costs but many specialist solicitors will offer to set up a straightforward trust for a fixed fee.  You can use some of your compensation to do this and, if you wish to claim benefits or services for any significant time, the relatively small cost of setting up a trust is likely to be outweighed by the value to you of those benefits of services.  

What are the benefits to a personal injury trust? 

A personal injury trust may be useful in the following ways: 

• It can help you manage the money by separating the money you have received as a result of your injury from your other money. 
• If you are worried about overspending your compensation, or others asking you for money, it can provide some structure and restrictions (if you want them) 
• It can help “ring fence” the money you have received from means assessments for means-tested state benefits and for local authority care entitlement. Funds held within a personal injury trust are disregarded when assessing eligibility for some means-tested benefits and local authority care, so you can still receive such benefits and care without being barred due to having a large amount of capital over the capital limits. This is an important consideration if you claim state benefits, or may need to at some point in the future.  
• You can choose who the trustees of the personal injury trust are.  

When should I set up a personal injury trust? 

There is no time limit to setting up a personal injury trust however, the compensation you receive will only be disregarded by the Department of Work and Pensions (DWP), for financial assessment purposes, for a period of 52 weeks from the date of your first compensation payment. Please note that this disregard period may differ depending on which benefit you receive and when, so you should always seek specialist advice on your own situation. The general rule though is if you receive an interim payment of compensation, or other funds resulting from the personal injury such as an insurance payment, you should start thinking about setting up a personal injury trust to protect your compensation then, and not wait until the end of your case. 

It is important to be aware that if you do not set up a personal injury trust but spend some or all of your compensation during that 52-week period and also continue to claim means tested benefits or care, then how you have spent your compensation could be looked at by the DWP. You have a duty to notify the DWP when you receive compensation, if you are in receipt of means tested benefits.  

What are the alternatives?

You do not have to set up a personal injury trust for the money you received for your personal injury claim or CICA claim. Not everyone decides to hold their compensation in this way, but you should carefully consider whether this might be beneficial in your own personal circumstances and whether to get advice as to whether to set one up. 

If you would like more information about managing money you have received as a consequence of an injury you suffered, you can find a solicitor with trust law expertise at: Find a Solicitor - The Law Society.

NAPAC cannot provide legal advice, but if you a survivor of abuse and want to discuss your options for accessing justice, we have a partnership programme for law firms with teams who specialise in non-recent childhood abuse cases. Whilst we cannot recommend any one firm for your case, these firms can talk through your options and enable you to make an informed decision. 

This blog was written for the National Association for People Abused in Childhood (NAPAC) by Josephine Whitehouse, trainee solicitor with Leigh Day’s abuse claims team, and Amy Chater, Partner at Leigh Day specialising in Court of Protection financial deputyship matters.