A personal injury trust is a type of trust fund designed to help you manage compensation money received after an injury. Whether your injury comes from an accident, medical negligence, or any other type of personal harm, the compensation you receive can significantly impact your financial situation. A personal injury trust offers a way to protect this money and ensure it is used for its intended purpose.
Why Consider a Personal Injury Trust?
The main benefit of a personal injury trust is that it keeps your compensation money separate from your other assets. This means it won’t affect your eligibility for means-tested benefits, such as Universal Credit or Housing Benefit, and it ensures the money is used in a way that best supports your ongoing needs.
Additionally, it allows you to continue receiving your compensation while still being able to claim other benefits. Personal injury trust funds are governed by specific rules and obligations, typically outlined in a trust deed, with different types available depending on your individual situation.
Features of Personal Injury Trusts
Protects Benefits Eligibility
The most important advantage of a personal injury trust is that it helps preserve your eligibility for means-tested benefits. Compensation from a personal injury claim can be significant, sometimes pushing your financial situation beyond the limits that allow you to qualify for benefits. With a trust, the money is protected and does not count as part of your assets when applying for support.
Specialist Management of Funds
A personal injury trust lets you appoint two to four trustees who are responsible for managing the funds. Trustees have a legal duty to act in your best interests, ensuring the money is used wisely for things like medical care, rehabilitation, home modifications, or any other services that help with your ongoing recovery.
Designed for Personal Injury Claims
Personal injury trusts are specifically designed to manage compensation from personal injury claims, making them different from general trusts used for estate planning or tax purposes.
Legally Binding Agreement
A personal injury trust is a legally binding arrangement. This means the money placed in the trust is separate from your personal assets. The trust document outlines how the funds should be used, who manages them, and who benefits from them.
How Do Personal Injury Trusts Work?
When someone receives a compensation payout, they can set up a personal injury trust to hold the funds. The trust will be managed by one or more trustees, who are responsible for ensuring that the funds are used properly.
Here’s a step-by-step overview of how a personal injury trust works:
Choose a Trustee
The first step is to choose between two to four trustees. These can be family members, friends, or professionals like solicitors or trust companies. The trustee(s) are responsible for managing your funds according to the trust’s instructions.
Create the Trust Agreement
The trust agreement is a legal document that specifies how your compensation will be managed. It details who benefits from the trust, how the funds will be used, and the trustee(s)’ responsibilities.
Transfer Funds to the Trust
Once the trust is established, the compensation funds are transferred into the trust account. From this point, the money is no longer owned by you personally but is held by the trust.
Ongoing Management
Your trustee(s) will manage the funds according to the terms of the trust agreement. They will make payments on your behalf for things like medical care, living expenses, or rehabilitation costs.
Monitoring and Reporting
The trustee(s) must regularly review the trust to ensure the funds are being used appropriately. They may need to report back to you or to relevant authorities based on the terms of the trust.
What Are the Benefits of Having a Personal Injury Trust?
A personal injury trust offers a range of benefits, including:
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Protection for Means-Tested Benefits Eligibility: Keeping your compensation in a separate trust means it is not counted as part of your assets when you apply for benefits, ensuring you can still access support.
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Ensures Proper Use of Funds: The trust guarantees that your compensation will be used for things like medical care, therapy, or other essential needs, rather than being spent on unrelated expenses.
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Financial Security: It offers peace of mind by protecting your funds from creditors or mismanagement, securing your financial future.
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Continued Access to Compensation: You can continue receiving compensation while still claiming other benefits, without the worry of losing essential financial support.
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Control and Flexibility: You can specify how the funds should be used, giving you control over how the money is disbursed to meet your needs.
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Asset Protection: The funds are generally protected from being seized in case of financial disputes, such as bankruptcy or divorce.
Challenges in Setting Up Personal Injury Trusts in the UK
Unfortunately, many UK banks and building societies have ceased offering trust accounts, citing high costs and complex compliance requirements. This has made it more difficult for people with disabilities or those managing large compensation sums to establish personal injury trusts.
The Compensation Recovery Unit also reported a decrease in personal injury claims from 876,562 in 2018 to 467,783 in 2024. Despite this, the need for such trusts remains vital, especially for those with long-term disabilities or serious injuries.
If you’re considering setting up a personal injury trust, it’s essential to seek advice from legal and financial professionals to ensure your trust is set up correctly and complies with the relevant regulations.
When Should I Set Up a Personal Injury Trust?
There’s no strict time limit for setting up a personal injury trust. However, after 52 weeks of receiving your first compensation payment, the Department of Work and Pensions will start considering it in their financial assessments. It’s recommended to set up a trust as soon as you receive any compensation related to your injury, rather than waiting for your case to be fully concluded. Setting it up early ensures the money is protected for its intended use and helps prevent it from being misused or from affecting your benefits eligibility.
What Can I Spend My Trust Money On?
The funds in a personal injury trust should be spent on things that directly benefit you, such as:
- Medical treatment, private healthcare, and therapy
- Rehabilitation and care services
- Home adaptations (e.g., wheelchair access, stairlifts)
- Housing costs, such as rent or mortgage payments
- Transport costs, including vehicle purchases, taxis for medical appointments, or public transport
- Education, training, and recreational activities
However, you should avoid using the trust for things like gifting money to others, as this could affect your benefits. It’s also important to check with your trustee or get professional advice before making any major purchases to ensure the funds are used appropriately.
How Can Cel Solicitors Help Me Set Up a Personal Injury Trust Fund?
Setting up a personal injury trust can seem daunting, but CEL Solicitors is here to guide you through the process. Our experienced team will help you set up your trust, choose suitable trustees, and ensure all legal documents are in place. With our support, you can rest assured that your compensation will be managed effectively, and your eligibility for benefits will be protected.
For more information on personal injury claims, visit CEL Solicitors. If you are looking to start a personal injury claim, start here with our personal injury claim form. For professional advice and support, call 0330 173 4991 or fill out our contact form here.
