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Personal Injury Trusts: A Brief Overview

A beginners guide to Personal Injury Trusts and their uses
by

Catherine Greeves

on 26 February 2014

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Transcript of Personal Injury Trusts: A Brief Overview

Personal Injury Trusts:
A Brief Overview

What's in a Name?
...That which we call a rose by any other name would smell as sweet (1)

Personal Injury Trusts may be known by various different names:
Compensation Protection Trust
Trust for Disabled Persons
Special Needs Trust

All mean the same thing - a trust established as the result of a compensation award for a personal injury

It is the SOURCE of the award that is important
What can the money be used for?






Catherine Greeves APFS, CFPcm


The Basics
A
settlor
, the person or entity providing assets, sets up the trust;

The settlor names at least two
trustees
(ideally three) to control the assets and make payments on behalf of:

The disabled
beneficiary
for whom the trust was created

It is possible for the settlor and the beneficiary to be one and the same
Who is a vulnerable person?
Someone who has "spent" the money before it is received

Someone with predatory "friends" and relatives

Somone with a history of money or relationship difficulties (2)

Someone lacking financial experience
The Benefits of a Personal Injury Trust
Protection of Means Tested Benefits now and in the future

Protection against the cost of Residential and Nursing Home Care

Protection in the event of future loss of capacity

Possible protection from creditors(2)

Possible protection in the event of divorce(2)

Protection from negative influences
Who benefits from a PI Trust?
Those in receipt of Means Tested Benefits or who are likely to receive Benefits in the future

Vulnerable persons

Why use a financial planner?

The Trustee Act 2000

Relationship enhancement
The Professional Adviser
Trustees are obliged to obtain and consider proper financial advice

Trustees need guidance on:
RDR and the implications for them
Risk Profiling
Asset Allocation

The Professional
Adviser
Pre-Settlement
Provide Periodical Payment vs Lump Sum Assessments

Provide Cashflow Planning - should the legal team be arguing for larger lump sum payments?

Provide Personal Injury Trust and Means Tested Benefits Advice
The Client
When should the trust be established?
The 52 Week Disregard
Protects Claimant's Means Tested Benefit entitlement
Any capital in excess of £6,000 will become assessable for Means Tested Benefits purposes
Protected for a period of 52 weeks from receipt of award
Beware!! Clock starts ticking on first payment of compensation
e.g Critical Illness Claim
e.g Interim payment
Beware Deliberate Deprivation of Capital
(1) Extract from Romeo and Juliet by William Shakespeare

(2) The establishment of a Personal Injury trust doesn't necessarily guarantee that a PI settlement would be disregarded in the event of divorce or bankruptcy. However the timing of the establishment would be a factor that comes into consideration

(3) Housing Benefit; Working Tax Credit; Child Tax Credit; Income Support; Income based Job Seekers; Income related Employment and Support Allowance are all being replaced by Universal Credit. This process is scheduled to be completed across the country by 2017.









Disclaimer
This presentation is intended as a general guide into some aspects of Personal Injury Trusts. It is by no means a comprehensive guide to the establishment and use of Personal Injury Trusts. Any course of action will depend upon individual circumstances and objectives and we therefore strongly recommend you seek Independent Legal and Financial Advice.

If you require further information, please contact Catherine Greeves, Karen Vidler or Richard Randall at AV Trinity Limited on 01892 612500 or by email at:

catherine.greeves@AVTrinity.com
karen.vidler@AVTrinity.com
richard.randall@AVTrinity.com



Not just suitable for awards as the result of a judgement or Consent Order

Money held in the trust MUST be derived from a payment made as a consequence of a Personal Injury

BUT this may include (not an exhaustive list):
Payments from Critical Illness or other accident policies
Criminal Injury Compensation Scheme payments
Vaccine Damage Payments
Motor Insurance Bureau Payments
Lump sum payments following charitable collections or public donations made to injured parties
Out of Court settlements (eg by insurance companies)







What defines a Personal Injury Claim?
Notes
Restrictions on spending and withdrawal frequency have been relaxed

Spending should:
be for the benefit of the beneficiary
have the agreement of all Trustees

Typical uses may include:
holidays
School or university fees
New car purchase


Post-Settlement
Provide continuity of advice after the settlement

Provide expert advice and guidance on management of the funds

Provide lifetime financial planning advice

Help the settlement last as long as possible
Dependent on circumstances

As soon as practicably possible
The Three Certainties
Intention (ie words)

Objects (ie Beneficiaries)

Subject Matter (ie assets)
Means Tested Benefits
Includes:
Benefits paid by Department of Work & Pensions
e.g Housing Benefit; Income Support (3)

Benefits paid by local authority
e.g Provision of Long Term Care

Cascade benefits
e.g free prescriptions; free eye tests or dental care
The 52 Week Disregard
Full transcript