Personal Injury Trusts are legally binding financial agreements whereby a bank or building society account is opened solely for the purpose of enabling a nominated person (the Trustee) to manage a compensation award. It is a financial arrangement which is recognised by HMRC and the Department for Work and Pensions.
When the compensation (or interim payment) is deposited into the trust, it is not treated as “income” by HMRC (which seems sensible, as it isn’t income), meaning the claimant will not exceed the £6,000 threshold and therefore remains eligible for such means-tested benefits as the new Universal Credit Scheme.
For those who are not supported by benefits, it may still be advisable for them create a trust so as to remain eligible in the future should their circumstances change.
There are also administrative advantages as well. In particular, a Personal Injury Trust can be managed by Trustees (who could be family members) which would assist where the injury suffered has restricted ability to access banks.
In addition, a Personal Injury Trust is useful for seriously injured people below the age of 18. Classed as minors, their parents, guardians and/or legal representatives are able to manage the compensation award on their behalf.
Leanne is a Chartered Tax Adviser, specializing in advising on UK tax matters but also including overseas tax as needed. Leanne is head of Taxation Services at EHL Solicitors in Leicester.
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