Personal injury lawyers who successfully recover compensation for their clients should always suggest that further legal advice be sought about managing any award to ensure that it is protected for the long term. If organised wisely, the award will provide the client with care and support over their lifetime.

A personal injury trust is an effective vehicle for investing the award, while preserving a client's entitlement to state-funded care. However, there are time considerations involved. To provide the most efficient outcomes, private client lawyers should be consulted at the earliest opportunity post-settlement or decree.

Money management

Awards in personal injury actions vary enormously. However, in claims relating to brain or spinal injury, they are likely to be substantial. Many clients will not have experience of managing such a significant capital sum.

Transferring an award into a personal injury trust allows a client to receive the benefit of the award, while being assisted with the fund's management and investment strategy. If the award is placed in a personal injury trust it will be administered by trustees. The trustees are responsible for protecting and investing the fund. The recipient of the award selects the trustees, so he/she can appoint trusted friends and professional advisors. It is sometimes appropriate for the beneficiary of the trust to be a trustee, so that a degree of control and decision-making power is retained.

Personal injury trusts are a specialist area: depending on the client's circumstances, different trust vehicles should be considered. Experienced private client lawyers will review your client's financial and familial circumstances to advise on the most appropriate planning measure. The trust deed will usually provide that the funds be used for the benefit of the injured person. Provision can also be made for allocation of funds on the death of the beneficiary and for lifetime gifts to other individuals (e.g. family or friends).

Means-tested benefits

Individuals who have suffered brain or spinal injuries may be, or become, eligible for means-tested benefits. An award will be considered when assessing financial eligibility unless it is placed into a trust. A small award can take an individual over the eligibility threshold. Where this occurs, the injured party may need to use their award to pay for living expenses and support.

If an award is transferred to a personal injury trust, it becomes the property of the trustees. The capital sum, as well as any income it generates, is not considered for means-tested benefits purposes. Therefore, assuming other eligibility criteria are met, state-assistance will be provided. The capital value of the compensation can be invested and may provide the beneficiary with additional income.

There are time limits on transferring funds into a personal injury trust, after which the favourable treatment detailed above cannot be obtained. Therefore, it is beneficial to involve private client solicitors immediately post-settlement or decree.

Care at home

Individuals with severe brain or spinal injuries may wish to be cared for in their own home. This can be very expensive if arranged privately. Local authorities may disregard funds in a personal injury trust when carrying out a financial assessment for care at home, thereby allowing the beneficiary to access additional support. Every local authority will consider a case on its own merits.

Timely creation

When compensation is awarded for brain or spinal injury, specialist legal advice should be sought on placing funds into a personal injury trust as soon as possible. Timely creation and careful use of a trust can preserve the capital award for the beneficiary's lifetime while ensuring that they receive the care they need.

At Brodies, we have advised many clients on creating and administering personal injury trusts. If you think that your client would benefit from a discussion about managing an award, please get in touch.