A personal injury settlement may need managing for a number of reasons. These can include:
- Protecting against being pressured to use the money in the wrong way.
- Being unable to deal with the settlement due to a lack of mental capacity.
- Protecting your right to means tested state benefits.
- With larger settlements it is also important to ensure that the funds are managed in a way which allows them to provide for you for the rest of your life.
Benefit Regulations
Under the present state of benefit regulations, there is a fifty two week temporary disregard for funds received as a result of you suffering a personal injury. This means that the funds will not be taken into account for state benefit purposes. However, it is important to note that this fifty two week period starts as soon as you receive a payment as a result of your injury and once it expires, any further payments will have an immediate effect on your benefit entitlement. If protecting your entitlement to means tested state benefits is important to you, it is important to seek advice from a professional as soon as you become aware that a payment will be made to you.
Larger Personal Injury Settlements
If a larger settlement is involved then it may be worth looking at a professional Deputy or Trustee who is experienced in managing larger sums of money for people with more complex needs. The cost of a professional Deputy or Trustee can often be built into the settlement itself and so will not leave the individual with fewer funds available to meet their needs.
How Can A Settlement Be Managed?
A settlement can be managed in a number of ways. However the two most common options are through a Personal Injury Trust or Court of Protection Deputyship. A trust can take many forms and is designed to help protect your entitlement to means tested state benefits as well as to protect you from being pressured by others.
1. Personal Injury Trust
A Trust would involve placing your settlement under the control of other people, called Trustees, who are responsible for using the funds for your benefit. This can include capital payments for one off costs or regular payments for items such as a gym membership or training course. However, we recommend that the Trust is not used to cover those living expenses that should be met by any benefits which you may receive.
The money in a Trust would generally be treated as belonging to you for tax purposes and any income which the Trust generates would be added to your other income and may need to be declared by way of a Tax Return.
2. Court of Protection Deputyship
A Deputyship is generally used to manage a settlement when the person receiving it is unable to deal with the settlement themselves. It involves an application to the Court of Protection to have a Deputy appointed to manage not only the settlement but the individual’s general financial and legal affairs. This application can take around six months to complete, and you may wish to take advice on when to start this process.
The Deputy is required to report to the Office of the Public Guardian every year regarding the decisions they have taken on behalf of the individual and the funds they have handled on the individuals behalf. Should the individual regain the ability to manage the settlement directly then they can apply for the Deputy to be dismissed and may wish to look at placing the funds into a Trust instead, depending on their personal situation.
For more information, please see our frequently asked questions in relation to managing a personal injury settlement page.
How Nelsons Can Help
If you need any further advice on the subject above please contact a member of our Court of Protection team on 0800 024 1976 or via our online form for further information or to arrange an appointment.
Nelsons also have a Wealth Management team who can provide advice on the best place to invest your money, whether you are investing within the trust, require an income or for growth.