If you suffer a trip, fall, repetitive strain injury, or industrial disease in Northern Ireland then you could make a claim for compensation. If that claim is successful, you have the option to hold that money in a Personal Injury Trust.
But what is a Personal Injury Trust and how does it work? More importantly: how do you advise your clients whether they need one to protect their finances or not?
What is a Personal Injury Trust?
Personal injuries are a branch of tort law in Northern Ireland and the UK. The premise is that your client has suffered wrongdoing which was someone else’s fault.
When clients receive a personal injury compensation award, they receive a large sum of money. If they are unable to work and are receiving benefits – possibly due to said injuries – then the benefits and revenue service in the UK might well ‘confiscate’ the funds.
The funds will not be taken from the client, rather they will be offset against their benefit entitlement. This means that people receiving benefits are at a severe disadvantage when it comes to receiving compensation.
The Personal Injury Trust is a separate entity which will hold that cash in another bank account, under a trust, so that the benefits service do not count it towards your client’s entitlement.
How Does a Personal Injury Trust Work?
To set up a Personal Injury Trust in Northern Ireland, the client must open a second bank account where the money will be held. They will also need a specialist solicitor to help set up the trust in a legal sense.
With a Personal Injury Trust, the money goes to the trust and the client is the beneficiary. The trust can then hold the compensation claim award so that they can use the sum for the purposes for which it was intended, rather than living off it in place of benefits.
What are the Advantages and Disadvantages of Compensation Protection?
This is an advantageous plan for anyone who is currently receiving benefits in Northern Ireland and wins a claim for compensation. If the client is not in receipt of benefits then a Personal Injury Trust is not the answer.
The Personal Injury Trust for a compensation award is a good idea for children who are not yet old enough to claim compensation for themselves. The money can be held in the trust until they are over 18. A court must approve this.
The disadvantage of a Personal Injury Trust is that the client will have limited access to their funds.
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What Can the Client Spend Their Personal Injury Trust on?
The client can spend their Personal Injury Trust on whatever they like. They will only need the consensus of the trustees.
Can You Buy a House with a Personal Injury Trust?
Yes: if the client and their ‘trustees’ decide that buying a house as their personal residence or as an investment is beneficial to the trust. Technically any property will belong to the trust and not to the client. Therefore any income that they might make as a landlord will return to the trust, not to them.
What is the 52 Week Rule?
When the client opens the trust and deposits the compensation award they will have 52 weeks of protection from the benefits service. To put things another way, the client will have an interim period of 52 weeks from the date the trust begins wherein the personal injury compensation amount will not count towards their benefit eligibility.
Further Advice on Trusts for Compensation Awards in the UK
You can find more information regarding compensation legislation in Northern Ireland courtesy of Justice NI. You can also browse the types of trust which require registration within the country on the HMRC website.