Personal Injury Trusts
A personal injury trust is used when someone who is in receipt of means tested benefits has recovered damages for a personal injury which they have suffered. The trust is created to hold the compensation they receive with the aim of preserving the victim’s rights to such benefits. A personal injury trust can be in the form of an interest in possession trust, a discretionary trust or, more usually, a bare trust.
An example would be an accident victim who, before receiving the damages, is entitled to income support. They might lose that entitlement once they receive the damages if the damages were taken into account in the means testing process. If they set up a personal injury trust however and arrange for the damages to be paid into the trust the value of the trust fund is not taken into account in the means testing process and the entitlement to income support continues.
Although this is a simple example the law in relation to means tested benefits where someone has received an award of damages is very complicated. For this reason professional advice should be taken from a solicitor experienced in dealing with these situations before creating a personal injury trust