Personal Injury Compensation and Benefits
If you receive compensation following a Personal Injury claim, this may affect your entitlement to receive means-tested benefits.
If you have “capital” i.e. any money in bank accounts, savings or investments (but also including your compensation) of more than £6,000, this will reduce the amount of means-tested benefits you will be entitled to receive.
If your compensation and other capital taken together exceeds £16,000, your right to receive means-tested benefits is likely to stop completely.
This means that if you receive a compensation pay out as a result of your claim, you may no longer be entitled to receive means-tested benefits. The benefits affected are any means-tested benefits you might receive, not just those paid to you as a consequence of your accident or injuries.
Benefits affected would include Income Support, Jobseekers Allowance, and some elements of Employment Support Allowance, Housing Benefit, Council Tax Benefit and even your entitlement to receive Tax Credits.
Non-means tested benefits such as Disability Living Allowance would not be affected by receiving a compensation payment.
Protecting your entitlement to Benefits using a Compensation Protection Trust
If you receive means-tested benefits, being awarded a compensation payment could therefore cost you a considerable amount in lost benefits if you do not take steps to protect your position.
The law states that from the date you receive your first payment of any kind from any source relating to your injury, there will be a period of 52 weeks during which that compensation will be disregarded when calculating your entitlement to means-tested benefits.
However, if you receive more than one payment as part of your claim (or a payment from another source) then you will only be entitled to one 52 week “disregard period”. You will not receive another such period relating to the second or subsequent payments.
If you give away some or all of the money you receive in compensation, this may be treated by the benefits authorities as “deliberate deprivation”, i.e. you might be considered to be deliberately depriving yourself of the money you received in order to preserve your entitlement to benefits. In those circumstances, the money you gave away could be treated as yours and you could still potentially lose benefits.
You can protect yourself from losing benefits by entering into a Compensation Protection Trust.
If you place your compensation money into a Compensation Protection Trust, so long as the Trust follows the relevant rules, your compensation would not then be considered part of your capital and would not affect your entitlement to means-tested benefits.
If you place your compensation into a Compensation Protection Trust, you will lose some control over it as decisions about investment of the money and payment out to you will be made by the Trustees.
You cannot compel them to use the money in a particular way. The Trustees would not be able to make some types of payment, such as regular payments to you or regular payments of bills on your behalf, but they could pay for larger one-off purchases such as a car or a holiday. The Trustees need to be careful to ensure that they do not break the rules relating to these Trusts as, if they did so, that would once again affect your entitlement to means-tested benefits.
A Compensation Protection Trust does, therefore, mean that a Claimant relinquishes some control over their compensation. A Claimant may consider, however that this is something they are prepared to accept if it results in them retaining valuable means-tested benefits.
If you are making or contemplating a Personal Injury claim and you think that your compensation (together with any savings or investments you have) will be more than £6,000, and if you receive any means-tested benefits or think that you may do so in the future, you should discuss the implications with your solicitor and whether or not a Compensation Protection Trust would be suitable for you, in order to preserve your entitlement to means-tested benefits.
Please note that this article sets out the position as at 1st October 2010. This article is for guidance only and does not constitute legal advice. If you think you may be affected by the issues raised you should obtain formal legal advice.
If you have been injured no fault of your own or sustained any injury as a result of an accident then please contact us
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