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Many accident victims suffer with pain and difficulty for a significant proportion of their future lives. There are in excess of 5 million people receiving state paid benefits in the United Kingdom, so it is important to consider whether a lump sum damages payment arising from a successful Personal Injury claim may have an adverse effect on their entitlement to financial support from the State.

In the event that the injured victim of an accident is successful in achieving compensation, one must consider how best to protect both their settlement and any regular financial support that they rely upon.

In order to ensure that compensation is not taken into account if receiving, or on any future application for, means-tested benefits, one ought to carefully consider whether using a Personal Injury Trust may be beneficial. This is something which a Claimant in a Personal Injury claim, as well as their representatives, ought to be familiar with.

Even if a Personal Injury Trust may not seem immediately relevant, as the Claimant is not currently entitled to means tested benefits and services at the time that they receive their funds, consideration should be given to the possibility that their situation may change in the future.

A Personal Injury Trust is a vehicle by which both funds and assets can be held and managed by its Trustees. The funds held within a Personal Injury Trust ought not to come into consideration when applying for any means-tested benefits, and this therefore protects any current or future entitlement that the individual may have.

Instead of receiving the award directly into the injured party's own bank account, which would result in the loss of any current benefits, a trust is established by the injured party – known as the Settlor of the trust – and the award or any portion of it is held by at least two trustees, as chosen by the Settlor, on the injured party's behalf.

The trust should be set up within 52 weeks from when a first interim (if any) or a final settlement is received, but it is often best practice to set up a trust as soon as possible.

The Personal Injury Trust is known as a bare trust, which means that the injured person can retain control and the trust funds are treated as if they belong to the Settlor for both tax and succession purposes.

Whilst there are a number of requirements to setting up a Personal Injury Trust, the key points are that:

i. In order to qualify for means tested benefits, existing savings will still need to be below the requisite limit;

ii. The trust must be set up within 52 weeks of any payment;

iii. The monies must originate from a claim for compensation arising from a Personal Injury accident;

iv. The injured party will be the person creating the Trust; and,

v. The injured party will be the beneficiary.

Our Private Wealth Team at Trowers & Hamlins LLP work closely with our Personal Injury and Insurance lawyers to assist those that are injured in ensuring that they have access to both the compensation that they deserve, and also any financial support from the State to which they are eligible.