What are the Benefits of a Personal Injury Trust? | Curtis Parkinson
What are the Benefits of a Personal Injury Trust?

What are the Benefits of a Personal Injury Trust?

A Personal Injury Trust works pretty much the same way as most trusts, in that the Trust is created to manage assets (money, investments, land or buildings) for people. But there are several tangible benefits to setting up a Personal Injury Trust for those who will need long-term care following a severe injury.

The main advantage is that the funds held within the Trust are disregarded as capital when a person is means-tested for state and local authority benefits such as Housing Tax Benefit, Council Tax Benefit, Income Support and so on.

It is, however, a complicated area of law which can cause issues for those who are less aware. So, make sure you’re aware of the pitfalls as well as the benefits. And, take specialist advice where possible.


Advantages to creating a PI Trust include:

  1. The compensation award is ignored when assessing your entitlement to means-tested benefits and local authority funded care;
  2. They offer protection from the undue influence of friends or family (particularly useful when the Trust involves a vulnerable individual);
  3. They can help those who have a lack of experience in handling large sums of money;
  4. They can ringfence your compensation award in the event of divorce or separation;
  5. They can safeguard your financial future.


These include:

  1. The person whose Trust it is, cannot have direct access to the fund;
  2. The Trust must have its own bank or building society account. Setting this up can be time-consuming;
  3. The Trust must have at least two Trustees and the Trust’s bank account must require at least two signatures of Trustees. This can be quite limiting;
  4. There are several types of Trusts. Depending on your personal circumstances, it may be that a more straight-forward Trust, such as a Bare Trust, may not work to your advantage from an income tax and Inheritance Tax (IHT) perspective;
  5. Depending on the complexity of the Trust, there will be a cost to setting it up and, in some cases, administering it.

Appointing Trustees

You will need at least one person other than you to act as a Trustee. A Trustee can be anyone over the age of 18 (including family and friends). They should not be bankrupt or have a criminal record.

If a Trustee wishes to cease being a Trustee, becomes incapable or dies, then a replacement Trustee would usually need to be added.

How Do They Work?

  1. Trustees are appointed. They will manage the Trust and look after the money held within it. If money is needed from the Trust, all Trustees must agree to its release;
  2. A Trust deed will then be drawn up and signed by the chosen Trustees;
  3. In order to remain eligible for state benefits, your compensation award should be held separately from your personal finances. You may need to open a designated trust bank or building society account and include your Trustees as signatories;
  4. The Trust is then registered with HMRC. Depending on the details of the Trust, information about money held in the Trust may need to be added to annual tax returns;
  5. Outside the Personal Injury Trust, you and your partner can hold up to £6,000, before any state benefits are affected. As required, you can top up your own bank account with money from your Trust;
  6. If the person whose Trust it is, dies, the contents of the Trust will usually be added to their estate and be distributed in accordance with their Will. So, it’s important to make sure you take this into account when planning ahead;
  7. Of equal importance to an appropriately drafted Will, is a Lasting Power of Attorney (LPA). An LPA will ensure someone you choose will be able to manage your financial and legal affairs if you were to find it difficult or impossible to do so yourself.

Our Advice

If you have received a compensation award and receive state benefits or local authority care, you should consider the genuine benefits of setting up a Personal Injury Trust.

For more information or advice on Personal Injury Trusts or planning for your future, please contact us. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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