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How does a Personal Injury Trust benefit you during a Personal Injury claim?

Means-tested benefits such as housing benefit, universal credit and council tax credits and access to care services are assessed based on your income and savings. If you have been successfully awarded compensation [”damages”] in a personal injury claim this could affect your eligibility to receive these benefits, both now and in the future.

In order to preserve your entitlement, you could put your damages into a Personal Injury Trust (also known as a Compensation Protection Trust). This will stop your damages being taken into account when you are assessed for means-tested benefits and care services and ensure you receive the maximum benefit from your personal injury award.

First things first, what is a Trust?

What is a Trust? Are Trusts complicated? Is it hard to access money tied up in a Trust? Will the tax consequences outweigh the benefits? If you have never dealt with Trusts before they can be daunting and I hope this short article addresses any concerns you may have. Trusts are great tools that can be used to protect your money and in this case your entitlement to future benefits.

A colleague once told me to imagine a Trust as a sweet wrapper, a protective packaging designed to protect the contents inside. The idea of a Trust is to protect the money inside it and separate it from the rest of your savings and income.

A Trust is usually set out in a legal document called a ‘Trust Deed’ which confirms the following:

  • The Parties – this includes the person who places the funds into the Trust, i.e. the injured party in a personal injury claim (the ‘Settlor') and the people who will carry out the day-to-day administration and control of the Trust (the ‘Trustees’);
  • That the Trustees will hold the money within the trust (the ‘Trust Fund’) on Trust for the Settlor absolutely;
  • The Trustees powers on distributing income and capital; and
  • The other powers of the Trustees which can be as flexible or restricted as the Settlor wishes. This could include investment of the Trust Fund, borrowing, expenses, delegating and granting security, to name a few.

What is a Personal Injury Trust?

A Personal Injury Trust is a Trust set up in order to hold the injured party’s damages.

A Personal Injury Trust can be one of several types of Trust. The most common being a Bare Trust. In a Bare Trust, the funds are held on Trust for the injured party and the injured party can choose to end the Trust at anytime. The type of Trust should be carefully considered at the time the Trust is set up and your solicitor will be able to discuss the different types with you and recommend the Trust best suited to your circumstances.

Will I have to pay more capital gains and income tax?

Provided the Trust is a Bare Trust then it means any income obtained on the Trust Fund will be yours and taxable at your normal rate. It will therefore need to be declared on an income tax return. Payment of capital to you is not subject to income tax. The damages themselves will not be subject to tax, only any income received on them (i.e. through investment by the Trustees).

How do I set up a Personal Injury Trust?

Careful consideration should be given to the people you trust to administer the Trust as they will have control over it. You can be one of the Trustees and we would recommend you appoint at least a further two Trustees. Anyone can be a Trustee provided they are over the age of 18 years old and have mental capacity. You may choose to appoint friends or family members or a professional.  You can change your Trustees at any time by way of a Deed of Appointment and/or Retirement and you also have the option to wind the Trust up at anytime.

Once you have decided on your Trustees, you should instruct a solicitor to explain the different types of Trust and draft the Trust Deed.

An important point to note: If the injured party is a child or mentally incapable then the High Court (children cases) or Court of Protection (mentally incapable persons) will need to agree to the creation of the Trust. This is to ensure the best interests of the injured party are being protected.

The ‘52 week rule’

When it comes to assessing means-tested benefits there is a grace period of 52 weeks which means that from the day you receive a first payment in consequence of a personal injury claim, it is ignored for 52 weeks before it is then taken into consideration when being assessed for means-tested benefits. It is important to note that this is the date of the first payment of any payment made in relation to the claim so it could be an interim payment or an insurance payment paid by your own insurance company. The 52 weeks runs continuously from the date of the first payment and does not start again on receipt of further payments.  A Personal Injury Trust should ideally be set up before receipt of the first payment.

It is important to note that the 52 week rule is not a time limit. A Personal Injury Trust can be set up at anytime even after this time period. However, if it is set up after 52 weeks then your income and savings for the period from 52 weeks after receipt of initial payment until the trust is set up will be taken into consideration when you are being assessed for means-tested benefits. 


If you have been injured and are at the early stages of pursuing a personal injury claim then you should consider setting up a Personal Injury Trust ready for receipt of any damages. If you have received a payment on your case then you should consider setting up a trust without delay before the 52 week period ends. Even at this present time if you aren’t eligible for means-tested benefits or do not require access to care services provided by the Local Authority, there may be a time in the future that you could become eligible had it not been for your personal injury damages.

If you instruct the Moore Blatch Serious Injury team then we will always advise you upon the benefit of a Personal Injury Trust, based on your particular set of circumstances, to preserve your entitlement to continued receipt of payments that might otherwise be affected by an award of compensation.

If you have suffered a Serious Injury then contact our Serious Injury Team today on 0800 157 7611 to explore how we might assist you with a personal injury claim.


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