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Can personal injury compensation impact means-tested benefits?

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How to pay for legal fees

If you have been awarded compensation in excess of £6,000 for a personal injury as a result of a legal claim and are in receipt of means-tested state benefits, you may find the compensation award, if paid directly to you, means you are no longer eligible to receive these income-related benefits.

How am I able to keep my benefits?

You can keep the benefits by setting up a personal injury trust to ensure your compensation does not affect your means-tested benefits and if you are not in receipt of mean-tested benefits now, should you be eligible in the future provided it was set up at the time the compensation monies were received it will still give you protection.

How do personal injury trusts work?

The trust is set up by signing a trust deed, a legal document, which states the purpose of the trust. A bank or building society account is then set up in the name of the personal injury trust and the money from the compensation is paid into that account and can be accessed by your trustees. The monies can be used for your benefit and if money is needed by you from the trust, all trustees must agree to its release.

The trust will need at least two trustees and can be anyone you choose. They must be over 18 and can be a family member or friend or a professional trustee, such as a solicitor.

It is important your trustees avoid making payments from the trust into your own bank account to ensure that the means-tested state benefit capital limits are not breached.

It is advised that payments from the trust are made directly to the providers of goods and services rather than transferring money directly into your account.

In summary a trust is a device to hold the compensation. You are simply asking trustees to manage and use the compensation for you. You can be a trustee yourself.

By Sharon Edwards, paralegal in the personal injury department