If you were to suffer a personal injury – perhaps at work, playing competitive sport, or in a road traffic accident – you might receive a lump sum payment, through damages, an insurance policy or even JustGiving donations.
If you were then unable to work as a result of the injury, you might also have expectations of receiving some State benefits or community care assistance. However, when calculating your entitlement, the Department for Work and Pensions (DWP) and local authority can take account of any payout you received after a short grace period.
This can come as a shock to injured parties, denting their assumptions about their future finances and income.
But if the injured party uses a Personal Injury (PI) trust to hold the payout, he or she may not have to forgo State benefits or community care payments. These trusts are still relatively underused, even among some personal injury lawyers, but they can be extremely useful.
Putting payments linked to a personal injury into a PI trust means that they will be ‘disregarded’ by the DWP and local authority when they calculate any means-tested benefits entitlement. A key point to remember here is that for this to work most effectively the PI trust should be set up within 52 weeks from the first payment due to the injury.
Although a PI trust can be set up at any time subsequently, any payment held outside the PI trust after 52 weeks will not be ‘disregarded’ and can therefore affect your benefits entitlement.
As with all trusts, there’s no one-size-fits-all, and issues such as cost mean that a PI trust will not be suitable in every circumstance. However, if you do receive a personal injury payment, be sure to investigate the possibility of a PI trust well before the 52 weeks are up.
