Personal Injury Trust
What is a Personal Injury Trust?
Any income or savings will be taken in to account by the Department of Work and Pensions when determining entitlement to certain benefits. This will include any compensation received following a successful personal injury claim after the first year from the date of payment.
This can be avoided however by setting up a personal injury trust (sometimes referred to as a special needs trust). The trust can be set up relatively easily and will protect both current and future entitlement to certain state benefits, Local Authority assistance and/or other sources of state-assisted help.
There are different types of trust that can be set up and a variety of ways in which the compensation can be invested. This may require specialist advice depending on the amount of compensation and your particular needs.
You will need at least two trustees. They should be people you trust and must be over 18 although they do not need to have financial or legal training. They will be responsible for actually making all payments out of the trust upon your request as the fund is held in their names for your benefit. The trust fund should be held in a separate trust account.
What can the Trust Fund be used For?
If you have received personal injury compensation it is held in the trust for your benefit and there a few restrictions on what this can be spent on. It can also be used for the benefit of some family members, particularly where they are dependent upon you.
Cash payments can be made direct to from the trust but would be regarded as income. It is usually better for the trustees to purchase items direct from the trust fund to ensure you do not exceed any the income threshold that may apply to your benefits.
What happens if you die?
In the event of your death, the trust will end and any money within the trust will form part of your estate. Your estate will then be paid in accordance with the terms of your Will. If you die without a Will your estate will be distributed according to the rules of intestacy.
Tax on Interest received on Trust Fund
As most personal injury trusts are ‘bare trusts’, any income derived from the trust fund will be deemed to be yours and will be taxed at your normal tax rate.
At Sintons our personal injury specialists can advise you on issues relating to both state benefits, and the use of personal injury trusts.
All personal injury claims are pursued on a No Win No Fee basis so you can rest assured that there is no financial risk.
To begin a personal injury compensation claim or obtain further advice with no obligation contact Sintons 24/7.