What is a Compensation Protection Trust?
Compensation Protection Trusts are designed to ensure that any compensation awarded from a personal injury claim is not taken into account if you claim any means-tested benefits or need local authority support for residential care now or in the future.
What are the benefits for you?
If you claim any means tested benefits such as Universal Credit, Employment and Support Allowance, Tax Credit, Housing Benefit or Council Tax Benefit and go onto receive damages then your compensation may reduce or even stop your entitlement altogether.
By having a Compensation Protection Trust in place you should retain your benefits and your compensation. In your lifetime there’s a possibility you may need some level of care whether it be at home or in a nursing or care home.
By having a Compensation Protection Trust in place your funds are disregarded when being means-tested towards the cost of the care to be provided.
If the Compensation Protection Trust is required because the injured person is unable to look after the compensation themselves, or if they are too young and the Compensation Protection Trust fund needs protecting until they are 18, the compensation received is effectively put under the control of the persons nominated to be Trustees.
Who should be my Trustees?
Obviously your Trustees should be people that you trust and may include family, friends and or a solicitor or other professional. You decide who to appoint as your Trustees but they must be over 18. If you do choose to involve friends or family, it’s preferable to have at least two Trustees. Your
Trustees can look after any property or money in the Trust in the event that you cannot. Just remember being a Trustee can be quite demanding as it is a complex area with many rules and tax implications that need to be considered.
Banner Jones have an experienced Trust team who can help set up and manage these Trusts, allowing families to adjust to the injury without the burden of managing a Trust as well.
When do you need to set up the Trust?
The sooner the better, this will enable you to obtain maximum benefit from the trust. The Compensation Protection Trust must be set up within 12 months of you receiving your first payment under the claim for it to be effective in protecting your right to benefits. Our team are here to support you and can set a Trust up as part of the claim process.
If you do not have any immediate plans to spend the compensation which you are likely to receive, then we would recommend that you take steps to receive independent financial advice.
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