Personal injury trust fund

mildred1978

LisaB85 wrote: »

Because he is on benefits and in debt due to the accident, neither him or my mum are capable of spending wisely the rent would go unpaid etc then they are likely to deprivate their capital.

They wouldn't be allowed to buy a new car, holiday, pay debts off then claim once it is under 16k.

So what will happen to the money? Is it just going to sit there?

mildred1978

No reason in the world not to use some of the £20k to pay off debts or replace a car. If it was a £200k settlement that got spent just to get below £16k it would be different. Your parents should use the money, not sit on it. That's what it's for!

sparky1989

LisaB85 wrote: »

They wouldn't be allowed to buy a new car, holiday, pay debts off then claim once it is under 16k.

From memory this is wrong but from post 1 to asking to post 3 to suppling answers can you provide information to back this up. Try to protect all bases , could be cost effective if the debts/car are costing money in the long term .

LisaB85

mildred1978 wrote: »

So what will happen to the money? Is it just going to sit there?

He can withdraw money from the fund when he needs to spend it.

mildred1978

LisaB85 wrote: »

He can withdraw money from the fund when he needs to spend it.

Then it's not a trust deed.

How much debt do they have?

bobthedambuilder

mildred1978 wrote: »

Then it's not a trust deed.

How much debt do they have?

Wrong. The type of personal injury compensation trust usually set up in these circumstances is a so-called "P.I. Bare Trust", where both capital in and income from the trust exists solely for the benefit of the beneficiary. The beneficiary will have full access to the funds, and they can be used at any time. A lawyer will usually recommend that they are not used for day-to-day living expenses.

The beneficiary to a bare trust has to declare any income which the trust makes (e.g. interest, capital gains etc), on his/her own personal tax return and will pay any net tax due. I would guess that this means the OP's stepfather would have to fill out a self-assessment income tax return in the future.

As others have said, the real purpose of setting up a PI bare trust is to protect that person's entitlement to means-related benefits - the funds within the trust are not considered by DWP as assets for that person. The reason for this being that compensation is not really compensation if it has to be used to replace benefits to which the person would otherwise be entitled.

I don't speak as a lawyer, but as a trustee to my brain-injured daughter's PI Trust.

greenface

Great info bobthe.... In short Make good use of any compo protect it from benefits (past-present & future)If the other side are paying for it to be set up discuss your options and take advantage of all advice. 20k is a lot of money but not life changing try not to use it like a current account .Interest rates are never good but you are gaining much more by still having your entitlements with due benefits & discounted council taxes/pescriptions etc .. Dont discount paying off any debts either which you can do (even within the protection of a trust account)
I dont speak as a solicitor but as the dad of a brain damaged son without a PI trust for other reasons but we did look into it in detail

lisyloo

No reason in the world not to use some of the £20k to pay off debts or replace a car.

There are some reasons.
Perhaps they don't have a need to replace their car right now, but might do in 12 months.
Perhaps they might want a holiday in future, but because of health issues don't want it right now.
It may not be convenient or sensible to spend the money right at this minute purely for the convenient of the benefit rules.

atush

But the debts are growing thru interest (and faster than any income from the trust) so i would have them pay off the debts first.

I hardly think the trustees would have a problem if the debt was incurred due to the injury accident?

agrinnall

I have no expertise in this area so my comment is based on what I've read in other threads. I was under the impression that paying off debts faster than the agreement made with the lender can count as deprivation of assets for benefit purposes. If so then maybe the trust gets round this.