Following an accident, you may be claiming means tested benefits to cover your day to day expenses or you may anticipate having to do so in the future.
Means tested benefits are income support, housing benefit and council tax benefit. Non means tested benefits are severe disablement allowance, disability living allowance, statutory sick pay, child benefit and incapacity benefit. In the ordinary course of events once you have over £16,000 in capital (apart from certain disregards such as the house where you live and personal possessions), you are no longer entitled to any means tested benefits. If you have over £6,000 your payment of benefit is reduced. The amount of capital you have does not affect non means tested benefits.
There are also those benefits that are assessed taking only your income into account. They are pension credit for the over 60s , working tax credits and child tax credits. The amount of other benefits paid to you can also be affected by the amount of income you receive.
If your capital has increased beyond the £16,000 level because of receipt of a damages award for personal injury, that money is not taken into account in any assessment of your means as long as it is administered through a trust or, while it is held in Court.
Once money is paid into your solicitor’s client account, it is counted as part of your capital for the purposes of a financial assessment of your means.
Even if it is not in a trust or in court, you can hold a damages award for fifty two weeks from the time when the first payment was made to you before it is taken into account in an assessment of your means for the purposes of benefits. If you are likely to receive all your damages within the fifty two week period and, if during that time you will be spending sufficient to bring the balance below £6,000 when added to your other capital savings, it is probably not worth your considering a personal injury trust.
If however you are expecting several interim payments or, if your final award will not be paid for some time, you should consider entering into a personal injury trust immediately your first payment is received.
Putting your damages award into a trust means that it is held in the names of trustees rather than in your own name. There are no restrictions on what the income or capital of the trust can be used for as long as they do not bring your capital above the minimum level of £6,000.
If you are awarded periodical payments rather than a lump sum, these can also be paid into a personal injury trust.
You are obliged to inform the Department for Work and Pensions of your change in circumstances once the first interim payment has been made to you. We can help you with this if you wish.
The type of trust most commonly used is called a bare trust which is a simple form of trust whereby you are the only beneficiary and the trustees hold money on your behalf. However, a more complex form of trust may be more suitable to your personal situation.
For further information please contact: Veronica Cowdrey.