Compensation Protection Trust

Protecting your compensation

These types of Trusts, also known as Personal Injury Trusts, can be used to “ring fence” any compensation payments resulting from either a Personal Injury or Medical Negligence claims thereby ensuring that you remain eligible to receive means tested benefits both now and in the future.  

Under such an arrangement, Trustees (who are nominated by you) hold the compensation in a separate account for your benefit.  The terms of this management are contained within the Trust document known as a Deed.   It is important to set up such an arrangement as soon as possible before the expiry of the 52-week disregard period.  

You can appoint yourself and/or family members and friends as your Trustees however, in certain circumstances, particularly if the award is large or you feel that you have enough to deal with without taking on additional financial and tax administration, Eaton Smith LLP can act as a professional trustee.  Eaton Smith LLP has extensive knowledge of acting in such roles and can often maximise the advantages of such a trust through professional advice and support.

What are the benefits of setting up such a Trust?     

The principal benefit of such a trust is that it protects your current or future entitlement to means tested benefits but there are other benefits to such an arrangement:

  • You may have a lack of experience in handling large sums of money;
  • Protection against the undue influence of friends/relatives or indeed from yourself if you are afraid you may “blow the lot”.
  • Some element of ring-fencing resources from potential separation or divorce;
  • Help with safeguarding your financial future particularly if you can not longer work or may have to retire earlier than expected.  

What would happen if I don’t set up a Trust ?

Once you have funds in excess of £16,000 (including any previous savings/bank balances in addition to the compensation awarded) you will stop receiving any form of means tested benefits.  Once your capital has dropped below this amount again you can re-apply for benefits (if necessary) however, this can often be a time-consuming process.   

Why don’t I just spend it all in the first year?

As the award is your money you are free to proceed in any way you wish however, you need to be aware that the DWP and Local Authorities can treat an amount which they believe to have been “alienated” either through spending or as a gift as still being assessable in relation to your benefits.  You could therefore end up in a situation when you on longer have the money but, your benefits may still be stopped or interrupted.

What will Eaton Smith LLP do for me?

  •  Advising on the various options available;
  • Drafting individually tailored documents which meet your needs;
  • Arranging for a financial advisor to liase with both you and your Trustees;
  • Liaising on your behalf with the various government and benefit agencies;
  • Registering the Trust with HMRC;
  • Completing the Trust Tax returns;
  • Preparing annual Trust accounts;
  • Managing the Trust Fund alongside the financial advisor.

Why choose Eaton Smith LLP?

We offer a bespoke service to each client which is fully integrated with that offered by our experienced Personal Injury/Medical Negligence team.  We utilise a wide range of knowledge, expertise and experience to ensure that our clients are fully supported through the whole process from raising the initial action to settling the compensation into a Trust.  

This is a very complex area of law and specialist advice may often be required on a variety of issues including, tax legislation and capacity issues amongst others to ensure that you are not disadvantaged by payments and that your interests are protected.    

How much will a PI Trust cost me?

Our costs are determined by the circumstances of the case however we can meet for a free no-obligation initial meeting after which we will be able to provide a fixed fee of the initial trust formation work.  

If you would like any further information, please contact Lucy Cortis on 01484 821 445 or alternatively via email at lucycortis@eatonsmith.co.uk.

Team for You – Compensation Protection Trusts

T: 01484 821409
Ben Cooper
Ben Cooper
Partner
T: 01484 821 445
Lucy Cortis
Lucy Cortis
Solicitor

contact


SEND