There is a common public misconception that those who have received large compensation payments are always adequately provided for by their settlement. The costs of long-term accommodation or care in comfortable surroundings can quickly deplete even a large value award. Regardless of the value of compensation received, an injured person may still be entitled to receive state support towards the cost of their care, whether at home or in a residential home.
Since 1993, care has been the responsibility of the Local Authority, rather than a function of the DWP. The result of this is that each Local Authority interprets the rules and exercises their discretion differently. Where an individual lives can affect the level of care they receive, and the application of some of the rules will be dependent on the Local Authorities attitude to funding.
Currently, two different systems operate depending on whether the injured party places their funds in trust. Those who receive their award and do not place these funds in trust will be responsible for paying for their own care and will not be entitled to benefit from the possible financial protections afforded to those individuals who have placed their funds in trust. However, even for those who have placed their funds in trust there is a two-tiered system in relation to care. For those in residential care, there are statutory safeguards that mean the award held in trust is ringfenced and disregarded in any financial assessment. However, there are different rules regarding those who need care at home.
Residential care
For residential care, the lower limit, under which capital is disregarded, is £21,500. The upper limit above which the resident will be regarded as "self funded" and responsible for their own residential care costs, is £35,000.
Residential care is paid for by the local authority to the care home directly. However, the National Assistance (Assessment of Resources) Regulations 1992/2799 impose a duty on Local Authorities to recover the full costs of residential accommodation if the injured party can afford to pay. However, if the injured party has placed their personal injury compensation in trust, the value of the award must be disregarded by the local authority in their financial assessment in terms of paragraph 10 of schedule 4 of 1992 Regulations.
Sums placed in trust are not caught by the deprivation of capital rules. Regulation 25(1) states that “a resident may be treated as possessing actual capital of which he has deprived himself for the purpose of decreasing the amount he may be liable to pay for his accommodation except (a) where that capital is derived from a payment made in consequence of any personal injury and is placed in trust for the benefit of the resident”.
This refers specifically to residential care and has not been drafted adequately to extend to those who are cared for at home.
Care at home
While there are statutory protections for funds held in trust for residential care, no similar legislation has been enacted for those cared for at home. Personal injury compensation can be considered even when placed into trust.
The Scottish guidance ("Charges Applying to Non-residential Social Care Services") recommends that local authorities establish the breakdown of any compensation award and consider whether some elements of compensation payments should be included when assessing an individual’s ability to pay for care. However, this is only a recommendation and each local authority has discretion to apply the rules as they see fit.
The special relationship between personal injury trusts and state support
The injured party has a duty to inform the Department of Work and Pensions or Social Security Scotland and the local authority of any change in financial circumstances.
Most personal injury compensation payments for which a trust is being considered will exceed £16,000. By placing the compensation in a trust, the injured person protects their award and preserves their entitlement to means-tested state benefits and, in some cases, to local authority support.
Ordinarily, this would be caught by rules on “deliberate deprivation of assets”. A benefits claimant is not allowed to deliberately reduce their assets in order to claim more benefits. The DWP is entitled to take the assets they have deprived themselves of into account when assessing their eligibility for benefits. However, personal injury trusts enjoy a special relationship with means tested benefits.
In summary, placing your award into a personal injury trust will ringfence the compensation award and will enable the injured person to receive full support for residential care costs (provided the remainder of their personal estate is not above the previously mentioned capital limits). Whilst a personal injury trust does not guarantee that an injured person will receive local authority support for care at home, local authorities do have discretion to treat compensation awards held in trust in the same way as the DWP and it will protect the award for means tested benefit purposes and will ensure protection if residential care is required later in life.
Our team of experts can set up and manage a personal injury trust for you or a loved one. If you think that you would benefit from a discussion about personal injury trusts, please get in touch.
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Senior Solicitor
