Protecting Your Compensation: The Role of Personal Injury Trusts

9th April 2025 | Louise Stradling | Personal Injury Trusts, Private Wealth,

Suffering a life changing injury is an incredibly emotional and challenging experience. It can leave you feeling overwhelmed, uncertain about the future and concerned about how to manage your finances. Receiving compensation after a personal injury can offer much-needed relief — but safeguarding that money is just as important, especially to protect your long-term financial security

What is a Personal Injury Trust?

A Personal Injury Trust is a legally binding arrangement usually in the form of a Trust Deed, where your compensation is held and managed by trustees on your behalf. Allowing you to focus on recovery and rebuilding your life without worrying about losing access to means tested benefits or other financial support.

Key Benefits

1. Preserve Means Tested Benefits: Funds in the trust are disregarded for state benefits and local authority care assessments, ensuring you retain access to vital support.
2. Financial Protection: The trust prevents misuse of funds by others and protects against risks like divorce or bankruptcy.
3. Futureproofing: Even if you don’t currently claim benefits, a trust safeguards your compensation in case your circumstances change.
4. Structured Management: Trustees help manage the funds responsibly, which is especially useful if you struggle with financial decisions.
5. Flexibility: The beneficiary (the person receiving the compensation) can also act as one of the trustees, allowing them to retain control over their money.
   

Above all, a Personal Injury Trust provides emotional reassurance — knowing that your compensation is protected, responsibly managed, and available when you and your loved ones need it most. It’s not just about managing the money — it’s about protecting your future and the well-being of those who depend on you.

Step by Step Guide to Setting Up a Trust

1. Seek Legal Advice: Consult a solicitor experienced in personal injury trusts immediately after receiving compensation.
2. Choose Trustees: Appoint at least two trustees (you can be one) to manage the trust responsibly.
3. Open a Separate Bank Account: The trust must have its own account for transparency and compliance.
4. Draft the Trust Deed: Your solicitor will prepare this legal document outlining the terms of the trust.
5. Transfer Funds: Deposit your compensation into the trust account within 52 weeks of receiving it to preserve benefits eligibility.

Why Use a Solicitor?

Setting up a Personal Injury Trust involves complex legal requirements. Solicitors ensure:

• Compliance with strict rules about the source of funds (only personal injury compensation can be included).
• Proper drafting of the trust deed to suit your needs.
• Selection of appropriate trustees who can act in your best interests.

Conclusion

A Personal Injury Trust is not just a financial safeguard, it’s peace of mind. At Sherrards, we’re here to help you protect what matters most. If you’ve received personal injury compensation — or are expecting to — speak to our expert team about setting up a Personal Injury Trust tailored to your needs.