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Personal Injury Trusts: Protecting your Compensation Award

Personal Injury Trusts: Protecting your Compensation Award

When a person is injured as a result of negligence, there are several considerations to factor into the valuation of a claim. Past and future losses, service and care provided by family members, treatment costs and accommodation are just some examples of larger heads of claim which can be recovered from a liable party. The purpose of a personal injury claim is to put the individual back to a position they would have been in if not for the accident. Sums recovered in certain cases can therefore be significant.

In some circumstances, compensation awarded may have to last a person years or even a lifetime. After suffering injuries, individuals might find there are difficulties in working or taking care of themselves. They may be entitled to local authority assistance or means tested benefits, which can be affected where an individual is in receipt of a large amount of compensatory funds. It is therefore important for injured people to be aware of the protections available to them in terms of their recovered funds. One effective way to safeguard an injured person’s financial future is to set up a Personal Injury Trust.

What is a Personal Injury Trust and why should you consider setting one up?

Any Trust which receives funds as a result of a Personal Injury which is set up by an injured person can be classed as a “Personal Injury Trust”.  It is a legal arrangement where Trustees are appointed to oversee and manage the compensation money.

When compensation is received following a personal injury, it may increase your capital beyond the thresholds set for assessing means-tested benefits. As a result, you may lose entitlement to certain benefits and future benefit applications may be affected. 

The main benefits of setting up a Personal Injury Trust are twofold. Firstly, the assets that are held in the Trust can be disregarded when assessing your ability to claim means-tested benefits. Secondly, the assets within the Trust are ring-fenced and the Trustees can ensure that these assets are managed properly. If you become unable to look after things in the future, the Trustees will be able to continue to administer the Trust without any further procedures being put in place. This generally is not the case if the compensation money is held by you personally, when some quite complicated arrangements may be required.

Who should I appoint as Trustees?

You can appoint yourself as a Trustee along with your parent or guardian and anyone else that you deem suitable.  Depending on your circumstances, you may even consider including a professional person as one of your Trustees. It is important that the Trustees are individuals whom you know and trust.

While there is no limit on the number of Trustees, having three Trustees is generally recommended to ensure majority decision-making.

Is there a time limit to set up a Personal Injury Trust?

There is no set time limit for establishing a Personal Injury Trust, but it is advisable to do so as soon as possible.

A compensation payment received in respect of personal injury will be disregarded for the purposes of income related means tested benefits for a period of 52 weeks. This starts from the very first payment you receive. After 52 weeks, it will be taken into account. If your capital for benefits purposes at the end of the 52 week period is more than £6,000, your benefits will be reduced and if it is more than £16,000, your benefits will be stopped altogether. The 52 week period is not a time limit but rather a period of grace to allow you time to get your finances in order. The regulations regarding this matter are complex and if you want to use or consider that exemption, detailed advice based on your own personal circumstances should be obtained.

How can Thorntons help?

If you are expecting or have already received compensation due to a personal injury, our team of expert Private Client lawyers at Thorntons can provide you with comprehensive legal advice and guidance on the available options and the best course of action in your particular circumstances.

There are different types of Trusts to choose from, and we can advise you on the most suitable form of Trust based on your specific situation. We can also provide you with a bespoke Trust Deed and assist you and your Trustees with the ongoing administration of the Trust if necessary.

For more information on personal injury claims contact Michaela Dougan on 0131 322 6167 or e-mail For more information on setting up a Personal Injury Trust contact Megan Maclean on 0131 624 6829 or e-mail

About the author

Megan Maclean
Megan Maclean

Megan Maclean


Wills, Trusts & Succession

For more information, contact Megan Maclean or any member of the Wills, Trusts & Succession team on +44 131 624 6829.