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Personal injury trusts

We can create trusts to house money arising from the following:

  • a personal injury compensation award;
  • compensation from the Criminal Injuries Compensation Authority for injuries following an assault;
  • compensation from the Motor Insurance Bureau for injuries caused by an uninsured motorist;
  • an Armed Forces Compensation Scheme award;
  • payments arising from other government compensation schemes;
  • donations following an accident such as charitable or public donations;
  • payments from accident or travel insurance; and
  • payments from a professional negligence claim that was made due to a previous personal injury claim being undervalued.

We are also able to act as a professional independent trustee of personal injury trusts if required.

What is a personal injury trust?

The trustees of the trust look after the compensation money that was due to the person who brought the claim (the beneficiary of the trust). The money and any assets in which the money is invested (such as property and investments) will be in the names of the trustees. The trustees have a duty to use the money for the benefit of the beneficiary.

This type of trust is known as a bare trust. The money still belongs to the beneficiary, but it is looked after by the trustees.

In some cases, other types of trust may be more suitable for looking after the money. We can advise on the other types of trust that may be appropriate, depending on the circumstances.

What are the benefits of a personal injury trust?

If an individual is entitled to means tested state benefits such as income support, jobseekers’ allowance, employment support allowance and housing benefit, then placing their compensation money into a personal injury trust may enable them to maintain their entitlement to benefits.

The trustees of the trust manage the money on behalf of the beneficiary. The trustees ensure the money is protected and used to help look after the beneficiary for the rest of their life.

Even if the individual is not entitled to means tested benefits, it may be appropriate for a trust to be created so the trustees can help protect the funds for the beneficiary’s future. Circumstances may change – for example, they may become entitled to benefits at a later date. There can also be other good reasons to protect money within a trust rather than it being owned directly by the person who is receiving compensation.

What are the tax implications of a personal injury trust?

For tax purposes, the money remains the beneficiary’s, and it forms part of their estate when they die.

How is a personal injury trust created?

A trust deed is prepared and signed by the person creating the trust (the individual entitled to compensation) and the trustees who are to be appointed.

If the person receiving compensation is a child or lacks mental capacity, the deed will be signed by their appointed guardian, deputy or registered attorney. In those circumstances the court will need to approve the creation of the trust.

When should a personal injury trust be created?

If a personal injury trust is the right option for the person due to receive compensation, it should be created as soon as possible. To protect their entitlement to means tested benefits, the trust should ideally be created within 52 weeks of the first payment of compensation. This is the period during which the compensation will be “disregarded” for means testing for benefits. This is not a time limit to create the trust and the trust can be created later – but this may mean benefits are lost for the period of time during which the compensation money is taken into account.

Who can act as trustees?

The trustees can be individuals such as family members, or professional trustees such as solicitors or a trust corporation.

The Hugh James Trust Corporation Limited acts as a professional trustee of personal injury trusts.

Key contact

Matthew Evans

Partner

Matthew is a partner and heads up the firm’s private wealth offering. He is responsible for the development, implementation and long-term strategy of the team.

Matthew has a UK-wide reputation in the field of contentious probate, recognised by his clients and peers in the leading legal directories.

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