Personal Injury Trust Funds

If you have received - or are due to receive - compensation for a personal injury then it is vitally important to set up a trust to safeguard your money.

Otherwise you could lose your entitlement to benefits such as Income Support, Employment Support Allowance, Jobseeker’s Allowance, Housing Benefit and Council Tax Benefit.

Without a trust, the compensation you receive to pay for your treatment, care and rehabilitation could count against any means tested benefits you already receive or could claim in future.

Find out more about setting up a trust to protect your finances - contact our solicitors for expert, jargon-free advice.

Trusts - Definition

A trust is a legal entity that is set up by a ‘settlor’ (founder) to help a defined beneficiary or group of beneficiaries.

It is set up under strict rules and managed by two or more trustees (or a trust corporation) who work together under the terms of the trust to ensure it is administered properly for the beneficiaries.

A personal injury trust is designed specifically to manage compensation payments for people who have suffered injuries as a result of an accident, clinical negligence or criminal behaviour.

That could include an award of damages by a court, an insurance payout or an out-of-court settlement by an insurer.

It could also include payments from the Criminal Injuries Compensation Authority; Motor Insurers’ Bureau (for injuries caused by uninsured motorists) or the Armed Forces Compensation Scheme.

Other payments - such as donations by a charity or similar gifts - can also be protected by a trust. Find our more about setting up a charity.

Benefits of Personal Injury Trusts

Protecting your compensation - ring-fencing it - is the most important benefit of a legally binding trust but there are also other advantages.

It can be used to safeguard the interests of those who are unable to make decisions for themselves, such as very young children or those who have suffered extremely severe injuries.

The trust protects them from outside pressure - such as peer pressure from friends or other people close to them to ‘enjoy’ the fund and fritter it away instead of keeping it safe for its intended purpose.  

Also, the trustees - especially those who are professional advisers - will have knowledge that can prove highly valuable when making important decisions.

Types of Trusts

There are four main types of trust. Most personal injury trusts are Bare Trusts, the first type listed below:

  • Bare Trust - the money is held in the trust and managed by the trustees. When the individual dies, the money can be passed on in a will (without which it would be subject to intestacy rules and the state would decide what would happen to the estate)
  • Life Interest Trust - this provides the beneficiary with a lifetime income. On their death, the benefits would pass to other named beneficiaries (such as their spouse or children)
  • Discretionary Trust - the compensation is held in trust for the injured beneficiary but the trustees also have discretion powers to benefit others.
  • Hybrid Trust - this can combine the features of other types of trust, such as a life interest and a discretionary trust.

Get Expert Help From Our Trusts Team

Coles Miller is recommended in the UK Legal 500 guide for our solicitors’ expertise in handling personal injury and clinical negligence claims.

But winning any personal injury case is just the start. It is important that the compensation payouts are managed properly for the victim.

Ring-fencing the compensation in a trust is vital if the money is to fund all the medical treatment, care and adaptations to the victim’s home to help them cope with life-changing injuries.

For more information about setting up and managing a personal injury trust, contact your local Coles Miller office - we would be happy to visit you at your home or in hospital.

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