What Is a Personal Injury Trust?

If you have suffered a personal injury and received a compensation award, you may be wondering how to properly manage your funds. Compensation can be managed by setting up a personal injury trust, which is a legally binding agreement that allows you to hold and manage your compensation in a separate bank account, ensuring the money is spent on its intended purpose.

From maintaining your benefits to managing your finances over the long term, personal injury trust accounts come with many advantages. In this article, we will go through what a personal injury trust is, its benefits and disadvantages, and how it can affect your personal funds.

If you have any questions regarding personal injury trusts or how to set one up, contact our team and we will be happy to help.

How Does a Personal Injury Trust Work?

A personal injury trust is a legal arrangement that allows funds received from a personal injury compensation claim to be held separately from the rest of your finances, placed into a dedicated account.

The main purpose of a personal injury trust is to ensure that compensation funds are protected and managed correctly. This arrangement can be particularly valuable for younger individuals or those whose circumstances mean they are unable to manage their funds independently. Even for those who are fully independent, setting up a personal injury trust is a sensible step, as it ensures compensation is not spent on something other than its intended purpose or used in a way that causes financial harm.

Your personal injury trust will have a designated set of trustees to oversee the account and ensure that the funds are used in your best interests.

Why Use a Personal Injury Trust Account?

Using a personal injury trust account helps to protect your compensation, particularly if you currently receive, or may need to apply for, means-tested benefits. If the funds are not kept in a personal injury trust, after a grace period of 52 weeks the money awarded will be treated as savings and will no longer receive any special consideration. Money held in a personal injury trust is exempt from benefits calculations.

Some key reasons to use a personal injury trust account include:

• Protecting benefit entitlement: compensation held in a trust account is typically disregarded in means-tested financial assessments.
• Separating funds: allows you to keep your compensation payment separate from your other finances.
• Long-term financial management: keeping your funds in a dedicated account helps ensure they are used appropriately and managed correctly for their intended purpose.

What Is the 52-Week Rule for Personal Injury Trusts?

The 52-week rule refers to the period following the receipt of your compensation payment. During this time, the compensation amount is usually disregarded in means-tested benefit assessments.

This window gives you the opportunity to set up a personal injury trust without immediately affecting your benefits. However, after 52 weeks, any compensation still held in your personal accounts will be taken into account during these assessments.

What Are the Disadvantages of a Personal Injury Trust?

While there are a number of benefits to having a personal injury trust account, there are also some disadvantages to consider:

• Administrative responsibilities: trustees must manage the trust account and keep appropriate records.
• Costs: setting up a personal injury trust may involve legal fees, as well as ongoing management expenses.
• Access to funds: keeping your funds in a personal injury trust means you cannot make decisions about the money independently. All decisions regarding the funds must be approved by the trustees.
• Complexity: the setup and ongoing management of a personal injury trust can be complex for some individuals.

Who Can Be a Trustee, and What Are Their Responsibilities?

A trustee is an individual appointed to manage the trust account on your behalf. Generally, each trust account will have a minimum of two assigned trustees, who play a key role in ensuring your funds are protected and used appropriately.

Trustees can be:

• Family members or close friends.
• A solicitor or professional trustee, such as the personal injury solicitors at Accident Solicitors Direct.
• A combination of both of the above.

Typical responsibilities of a trustee include:

• Managing the trust funds.
• Acting in your best interests at all times.
• Maintaining accurate financial records.
• Ensuring payments are appropriate and justified.
• Complying with all relevant legal and regulatory requirements.

What Can Personal Injury Trust Funds Be Used For?

The funds held in a personal injury trust account are intended for any use that supports your needs and recovery following your injury. If you attempt to use these funds for a purpose that falls outside of this, your request may be rejected by the trustees.

Some examples of how these funds can be used include, but are not limited to:

• Required medical treatments, rehabilitation, or prescription expenses.
• Specialist equipment, or home and vehicle adaptations, based on your condition.
• Care and support services.
• Day-to-day living expenses.
• Improving your quality of life following your injury.

What Are Special Needs Personal Injury Trusts?

A special needs personal injury trust is an account designed for individuals who may lack the capacity to manage their own financial affairs effectively, or who require ongoing support due to serious injuries or disabilities.

While these accounts generally operate in the same way as a standard personal injury trust, they involve closer oversight from trustees and may also include other legal or financial professionals, such as financial advisers, to ensure the funds are managed appropriately.

When Should You Set Up a Personal Injury Trust?

We recommend setting up a personal injury trust as soon as possible, to avoid any issues relating to means-tested benefits you may be eligible to receive. Once established, the funds are protected and managed for their intended purpose.

If you are unsure about setting up a personal injury trust or have any questions, contact our team at Accident Solicitors Direct and we will be happy to help.

How Can Accident Solicitors Direct Help You With Your Personal Injury Trust?

Experiencing a personal injury can be stressful and overwhelming, but you do not have to go through the process alone. Accident Solicitors Direct is here to help.

Whether you are looking to make a personal injury claim or are seeking legal advice on setting up a personal injury trust account, get in touch with our team today to speak with an expert. With experience across a wide range of claim types, from road traffic accidents to workplace injuries, our solicitors are on hand to support you throughout your claim.

Contact us today for a free, no-obligation consultation — including a free home visit at a time that suits you — and take the first step towards getting the outcome you deserve.