When a claimant receives compensation following an accident, injury or clinical negligence, a common concern for their solicitor is whether this payment will affect their means-tested benefits or care funding. For many clients, this award could reduce or prevent them from receiving these benefits, which is why protecting these funds within a Personal Injury Trust (PIT) is fundamental to securing their financial interests.

In this article, we will offer our insights on this simple yet effective legal tool, explaining how Personal Injury Trusts work, how quickly they should be set up and how Paladin can support you and your solicitor by providing expert investment advice for Personal Injury Trusts.

What Is a Personal Injury Trust?

A Personal Injury Trust is a legal arrangement that allows claimants to hold their compensation separate from their personal finances, without forfeiting ownership or control, excluding it from capital when assessing eligibility for means-tested benefits. This ensures that the money you were awarded to cover the cost of future treatment, care or personal needs is not lost.

These trusts are recommended for anyone who:

  • Receives Universal Credit, Housing Benefit or Council Tax Support
  • Receives local authority community care funding
  • May require residential care later in life
  • Wishes to avoid later disputes about “deprivation of capital”
  • Needs to keep their finances clearly separated for assessment purposes
  • Seeks protection from bankruptcy or divorce in the future

As the regulations governing means-tested benefits are more lenient for individuals over the State Pension age, these claimants may still choose to set up a Personal Injury Trust for potential future care needs. Similarly, claimants who are not currently receiving benefits or local authority support may pursue a PIT if they are likely to apply for either in the future.

Why Compensation Can Cause Problems Without a Trust

Personal injury settlements become part of your capital as soon as they are deposited in your bank account. While this capital is disregarded by the Department for Work and Pensions (DWP) for up to 52 weeks, without protection beyond this point, you may encounter the following issues:

  • Capital above £6,000 will trigger tariff deductions from benefits working-age claimants
  • Capital above £16,000 usually ends entitlement entirely
  • For community care support, capital above £14,250 increases contributions and above £23,250 removes funding entirely

While some claimants attempt to circumvent this issue by spending the funds within the first 52 weeks of receiving them, they may still be affected by the deprivation of capital and notional capital rules if their spending is judged “unreasonable”.

Many claimants make the mistake of assuming that interim payments below the £6,000 threshold will not impact their means-tested benefits. However, if you expect to receive multiple interim payments or that your total award amount will exceed the capital limits, setting up a Personal Injury Trust is crucial to ensure your compensation is protected.

How Does a Personal Injury Trust Work?

The process of setting up a Personal Injury Trust involves:

  • Appointing two trustees, typically you and a family member, friend or your solicitor
  • Drafting a trust deed
  • Opening a designated trust bank account
  • Transferring personal injury payments into that account

Once the trust has been arranged, the funds can then be:

  • Held in the account
  • Invested
  • Withdrawn with the approval of the trustees
  • Managed with the support of a specialist adviser

Benefits of Setting Up a Personal Injury Trust

Claimants retain their compensation

Most PITs are bare trusts, which means you will maintain ownership of your money while continuing to receive means-tested benefits, either immediately or at a later stage.

Claimants maintain control

As the claimant is usually one of the trustees, this means you will be free to make all decisions jointly with your other trustees.

Funds can be spent as normal

Claimants can withdraw money from their Personal Injury Trust whenever they need. The trust simply provides a protective wrapper, ensuring your award is not treated as personal capital.

Answering Common Questions from Claimants

We appreciate that you may have many questions about maintaining your compensation in Personal Injury Trusts and how this may affect your ability to access and use these funds as intended. In the interest of maintaining clarity, we have collated some of their most common concerns alongside our client-friendly answers:

“Will I lose control of my money?”

No — you remain a trustee and must approve all withdrawals.

“Can I still spend my money?”

Yes — it is still your money, simply held in a protective wrapper.

“Will the trust affect my Will or estate?”

No — the funds form part of your estate like any other asset.

“Can I add other money into the trust?”

No — only personal injury payments can go in.

Choose Paladin for Personal Injury Trust Investment Advice

Placing compensation into a Personal Injury Trust is simple, inexpensive and extremely effective, but only when everything is set up properly, with expert advice and a compliant structure. Paladin handles the process from start to finish, giving claimants and solicitors complete confidence that their money is being protected.

Many claimants choose Paladin because:

We remove the risk

We provide specialist financial and technical advice on benefits and trusts, helping to ease the pressure on solicitors and reducing the risk of unsuitable product recommendations.

We handle everything quickly

We can take a client from referral to completed trust in under a week.

We achieve extremely high take-up

Over 90% of referred clients go on to set up a Personal Injury Trust, avoiding future benefit disputes.

We set up trust bank accounts

Due to the limited availability of trust bank accounts in the UK, establishing these accounts can be challenging for both clients and professionals. Paladin has extensive experience in setting up trust accounts and can recommend solutions that align with your clients’ long-term financial objectives.

We offer welfare benefits, care funding and future planning support

Our service solves several problems simultaneously.

We are upfront on costs

The quote for our service is fixed from the start, so you can be confident that you will receive the services we promised at the price we agreed. While our prices are fixed, our clients have the flexibility of paying at the start of the process, or deferring their payments until settlement has been reached.

 

To learn more about Paladin and the services we provide to claimants and defendants alike, or for tailored investment advice for Personal Injury Trusts, please get in touch with us today. Our team of financial consultants have structured compensation in loss of earnings and pension loss cases arising from medical negligence, personal and workplace injuries, so you can be confident that your compensation will be handled with technical expertise and an awareness of long-term financial outcomes.

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What our clients say

  • We first came across Steve and the Paladin Group due to a medical negligence claim. Our solicitors advised us to open a Personal Injury Trust account so that any award would be protected from affecting my wife’s benefits. Steve responded quickly, talked us through the purpose of the account, and had everything set up in no time.

    But it didn’t end there. I explained to Steve the level of benefit my wife was receiving and how we felt something wasn’t right but didn’t know where to start. He suggested we speak with Jane.

    Jane reached out straight away, visited us, and went through my wife’s current award and the issues we were facing. She immediately recognised that the benefit level was incorrect. She helped us submit a mandatory reconsideration (which was rejected), and then advised that the next step was to appeal to a tribunal. We followed her guidance.

    It was the best decision we made. The tribunal not only agreed with us but also increased the period of backpay owed to my wife.

    We cannot thank Steve or Jane enough for their hard work, honesty, and the speed at which they helped us. We would highly recommend them and the Paladin Group.

    Ian & Lyndsey

    Ian & Lyndsey

  • “Jane was Amazing! I am due to get my first benefits payment shortly. Completing the forms with Jane’s help was much better than trying to do alone as she is so on the ball and just made the whole process much easier and less stressful”

    LM

    Paladin Client

  • “Steve Farnfield is a great financial adviser in the world of Court of Protection investments. Not only is he a safe pair of hands technically speaking, he take the time to understand their needs, and demonstrates a genuine empathy towards those he is helping. He comes highly recommended.”

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    COP Partner at Large law firm

  • “I have worked with Steve for a number of years. I have found him approachable and quick to respond, with a wide range of knowledge which is always made readily available. He is able to connect with Deputyship and Trust clients and tailor his approach to their level of understanding, which means that they can be confident in his abilities and their security. I have found Steve easy to work with and he is always responsive and able to discuss and resolve any queries that arise, often ensuring he goes above and beyond to make sure the interests of vulnerable people are protected.”

    Testimonial about Stephen Farnfield

    COP Partner at Large law firm

  • “I have worked with Steve for over 10 years. He is approachable, knowledgeable and inspires confidence, especially in family members of those lacking capacity concerned about ensuring funds can last for their loved one’s needs for life. Whilst good advice should be a ‘given’ from any professional, the personable way he engages with people and puts them at ease, and his willingness to discuss matters of interest and importance to the client makes them feel at ease and provides great support and insight as a professional deputy.”

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  • When we were awarded a substantial compensation payment, our first action was to find a financial advisor to help make some big decisions. It wasn’t difficult to find well qualified and eager advisors. Stephen Farnfield had an extra quality however. He seemed to understand what this money meant to us as a family.

    Stephen is an excellent communicator. He knows his business and we trust his judgement. I have no hesitation in recommending Stephen Farnfield and Paladin.

    RM, September 2023

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