Compensation protection services and trusts should be considered where there has been a substantial compensation pay out to an individual in a personal injury claim.
Setting up a compensation protection trust (also known as a PI trust or Special Needs Trust) enables trustees, including family members and a professional trustee such as a solicitor, to manage the compensation lump sum and prevent it from being depleted too quickly.
The compensation can be invested in managed assets – such as stocks, property or funds – to provide an income for the recipient of the compensation.
Instructing a solicitor to act as a professional trustee can make the management of a compensation protection trust much easier for families and individuals, as a solicitor can hold the trust deed, can manage the trust’s assets – and can also advise on tax implications and make sure the compensation is used for the benefit of the person it is intended for.
Another key benefit of setting up a compensation trust is that the trust ring fences the compensation monies from being assessed if an individual is in receipt of welfare benefits – which may often be the case in personal injury claims where serious injury has occurred.
Even if a claimant is not in receipt of benefits at the time compensation is awarded, a compensation protection trust will ring fence the monies from being assessed if the individual applies for welfare benefits in the future.
A professional trustee (solicitor) offering compensation protection services can not only set up the trust, they can also deal with the Department of Work and Pensions over any welfare benefits being claimed, as well as the local authority housing department.
There are time limits involved in setting up a compensation protection trust – as soon as the first compensation payment is made, including any interim payment – the trust has to be set up within one year if it is to ring fence the compensation monies from assessment for welfare benefits.
If an estate contains a trust – such as a PI trust – there may be implications regarding inheritance tax. Currently inheritance tax is paid on a trust if:
Assets held in a trust are not included in an estate and are managed by the trustees – this means that certain assets can pass directly to the beneficiary without being assessed for probate.
Duncan Lewis Wills and Probate solicitors can advise on wills and trusts, including setting up compensation protection trusts and the administration of these, including the appointment of family members as trustees and the provisions of the trust.
We also advises on wills and trusts, including advising on inheritance tax on trusts.
Duncan Lewis has offices nationwide and in most major cities – and we charge competitively-priced fixed fees for wills, probate and trusts, whenever possible.
For expert legal advice on wills, probate and compensation protection services (trusts), call Duncan Lewis Wills and Probate solicitors in confidence on 0333 772 0409.