1. PI Trusts can be appropriate in all cases of accidental and criminal injuries, clinical and other negligence causing physical or mental harm and where compensation is given for any disease or injury caused as a result of a disease.
2. It is important to bear in mind that even if a person is not currently in receipt of means-tested benefits, they may be likely to become entitled and consideration therefore needs to be given in these circumstances.
3. Another use of a PI Trust could be in a case where long-term care is anticipated as a means of sheltering the assets.
4. In the majority of cases there will be no tax advantages of the creation of a PI Trust by virtue of the fact that most Settlors will wish to retain access to benefits and therefore be caught by the settlor-interest anti-avoidance provisions.
5. Paragraph 12 of Schedule 10 of the Income Support (General) Regulations 1987 (SI 1987 No:1967) applies to disregard the value of a PI Trust Fund as capital.
6. The payment of income from an annuity or income distributed from funds held in Court or income distributed from that arising on funds held in a personal injury trust are all to be entirely disregarded for the purposes of means tested benefits when used for items other than everyday living expenses.
7. The basic rules on deprivation of assets for benefit purposes do not apply to personal injury trusts. There can be no deprivation upon foundation. Income Support (General) Regulations (s)51(1)a.
8. There may be an argument for the use of a trust even if means-tested benefits is not a prime objection. In particular cases where the individual might be subject to mental degeneration or a propensity for eccentric behaviour in the future might be an argument for the use of professional trustees.
9. It is preferable for the personal injury trust to be set up in anticipation of a claim being settled. There is no requirement that the personal injury claim needs to be the subject of a Court Order. Payment may be a negotiated or mediated settlement.
10. The creation of the trust is still an event for inheritance tax purposes and so normal considerations apply. In almost all cases the gift with reservation of benefit provisions will apply.
11. The Trust would be in the position to purchase personal chattels for the use of the claimant.
12. The Trustees can even buy the injured person a home, the value of which is disregarded in assessment of capital for means-tested benefits purposes. Alternatively the Trustees can pay off the mortgage of an existing family home, which again has no means-tested benefits impact.
13. Any ongoing medical and therapeutical expenses, not currently paid for by Income Support, can be met from the Trust Fund. Such items should be paid direct by the Trustees to avoid any unnecessary balance in the claimant's name.
14. It is wise to avoid the Trust paying for items supposed to be funded by means-tested benefits such as ordinary clothes, footwear and heating.
15. Only compensation to an injured claimant themselves may be successfully placed in trust for the purpose of preservation of benefits. In cases where the injury resulted in death, it may be appropriate to consider a Deed of Variation whereby damages due to the Estate can be placed in a discretionary trust.
The MyClaim team of expert solicitors are experienced in this area and advise and draft the appropriate documents to make sure claimants are fully protected and entitled to continue to receive benefits.
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Damian Horan is head of legal services for MyClaim, specialists in personal injury claims.
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