Before the Money Lands: Placing a Personal Injury Trust Alongside a Serious Injury Settlement

A serious injury settlement is often spoken of as the closing chapter. In practice, it is closer to a handover. The claim may end, but the money that arrives has to be looked after, accounted for and used in a way that serves the injured person for years to come. For families who rely on means-tested benefits or local authority care funding, the arrival of a large sum can create an immediate and unwelcome problem: the very compensation intended to meet injury-related needs may reduce or remove the statutory support already in place.

A personal injury trust is one way of addressing that tension. It is not a solution for every claimant, and it is not a device for avoiding legitimate obligations. Used thoughtfully, however, it can allow compensation to sit in a structure that is treated separately from the claimant's own resources when certain means-tested assessments are made.

What a personal injury trust actually is

In broad terms, a personal injury trust is a discretionary trust holding compensation awarded for personal injury. The injured person is usually the beneficiary, while trustees hold and manage the funds. Because the beneficiary does not have an outright entitlement to demand capital, the trust fund is generally disregarded in means-tested assessments such as Universal Credit, Pension Credit and local authority charging for care.

The arrangement depends on the trust being properly drafted and on the money being compensation for personal injury. It is not a way to shelter ordinary savings, and it does not remove every financial consequence of receiving a settlement. Nor is it designed to prevent the money being used for the claimant's benefit. Its purpose is to preserve access to support that would otherwise be lost, while keeping the compensation available for the things it was awarded to meet.

When the question deserves a serious look

A personal injury trust is worth considering where one or more of the following applies:

• The injured person receives, or is likely to receive, a means-tested benefit.
• Local authority support for care is in place, or may be needed in future.
• The settlement is substantial and the injury is likely to require paid care, equipment or adapted housing over time.
• The claimant is a child, and the award will be held until adulthood.
• The injured person lacks capacity to manage money, and a deputy or attorney is involved.
• The family expects the claimant's needs to change, and wants a structure that can adapt without constant reassessment of benefit entitlement.

There are circumstances where a trust may add more administration than value. If no means-tested benefits are in payment and no local authority care funding is likely, a simpler arrangement may be appropriate. The decision should rest on the claimant's actual circumstances, not on a general assumption that a trust is always advisable.

Who holds the reins

Trustees are the people who manage the fund. They might include a family member, a trusted friend and a professional such as a solicitor or accountant. It is usually sensible to have more than one trustee, and to include someone independent of the family, particularly where the sums are large or family relationships are complicated.

A trustee's role is not to dictate how the beneficiary lives. Trustees must act in the beneficiary's interests, keep proper records, consider requests for funds and make decisions in line with the trust deed. In practice, many trusts work best where the beneficiary's day-to-day wishes are understood and respected, and where trustees can respond promptly when a need arises.

Professional trustees charge for their time. That cost needs to be weighed against the value of independent oversight. It is also important to establish, before signing, how decisions will be made, how quickly requests will be handled and what records the beneficiary or family will see.

Children, capacity and the court

Where a child receives a settlement, the money is often held in trust until the child reaches eighteen. The trust can provide a structure for that period and a clear handover point. Where the child lacks capacity at eighteen, a different framework may be needed, and the Court of Protection may become involved.

For adults who lack capacity, a personal injury trust can sit alongside a deputyship order. The deputy deals with the claimant's property and affairs, while the trustees manage the trust fund. The two roles need to work together, and the trust deed should be drafted with that overlap in mind. It is worth taking advice early, before the settlement is completed, so that the trust and any court application do not pull in different directions.

Questions to put before signing

A calm checklist can help families test whether a trust is right for them and what it will involve:

1. Which benefits or care funding are currently in payment, and which assessments will the trust affect?
2. Is the proposed trust a genuine personal injury trust, and does the deed reflect that?
3. Who will the trustees be, and will any of them be paid?
4. How will the beneficiary ask for money, and how quickly will trustees respond?
5. What records will be kept, and who will prepare accounts or tax returns if needed?
6. How does the trust interact with a deputyship, power of attorney or child settlement?
7. What happens if a trustee dies, steps down or disagrees with the others?
8. Are there tax consequences, including on any income generated within the trust?
9. What will the trust cost to set up and run each year?
10. What happens to the fund on the beneficiary's death?

The paperwork after the paperwork

Once a trust is in place, there are practical steps that should not be overlooked. The Department for Work and Pensions and the local authority should be told about the trust and the settlement. Records should be kept of decisions and payments. If the trust generates income, tax may need to be considered. The trust should be reviewed if circumstances change, particularly if the beneficiary's care needs increase or the trustees change.

None of this is intended to make a settlement feel more complicated than it already is. It is simply a recognition that compensation is not only a sum of money; it is a resource that has to last. A personal injury trust can be a quiet, useful part of the plan, provided it is set up for the right reasons and explained clearly before anything is signed. The settlement may end the claim, but the decisions that follow deserve the same careful attention.