Personal injury trusts

Quentin

Its a personal decision (and you need to know how much you have and how much you need etc).

See a professional advisor when you know.

stefano

Does anyone know if most high street banks offer PI trusts?

Quentin

Probably all high street banks will offer accounts to hold the trust money (if that's what you mean).

stefano

What do you mean by holding?

Quentin

A bank account "holds" the money that is paid into it.

stefano

I see. Then trust is not a special bank account then.

Quentin

No. (The trust's bank account is just where the money is kept)

You do need to get this explained to you by your solicitor!

Pee

I'm 99% sure a trust would be a good idea.

You and your wife can be trustees. You could then decide at any stage to pay out the money to repay the mortgage, as you felt appropriate.

(Obviously you would want to be very happily married for this to work, so you may consider other potential trustees.)

dtaylor84

stefano wrote: »

Would I be wise to use some of the compensation to settle my mortgage, or should I not do that?

I am not a lawyer, however, assuming you can afford to continue to pay off the mortgage without the compensation:

If you pay off the mortgage using the compensation you would then be able to save each month. You'd also pay less interest over the term of the mortgage. But the money saved could not go in to the trust, and could potentially disqualify you from means tested benefits.

If you don't pay off the mortgage using the compensation, you could instead leave the compensation (plus any interest / investment gains it earns) in the trust. This would not disqualify you from means tested benefits.

It's certainly something that needs careful thought (and professional advice).

System

I presume that a personal injury trust is simply a special case of a Discretionary Trust.
The advantages of this kind of trust for many different situations are twofold:

1) The money is legally owned by a separate entity, the trust. It is not part of your personal estate, has a separate tax regime, cannot be taken by creditors, and is not part of your capital.
2) Because of the discretion exercised by the trustees, any income paid out is not considered yours by right. The trustees, not you, decide what and when to make a payment. That I think is the reasoning behind the advice to keep any payments irregular, so as not to establish any patern of automatic entitlement.
If you need a payout for some purpose, you ask the trustees, and they at their discretion alone can decide how much, if anything, to pay.

The only problems are
1) the trustees need to make an annual tax return to HMRC
2) the range of investments open to a trust is a bit more limited. You can't simply pop the money in an ordinary savings account because they offer a good rate of interest this month - you need an account that will accept trust or multi-owner holders. You really need an IFA to advise on this, presuming that it will be a substantial fund intended to provide lifetime compensation.

Trustees of a discretionaty trust can indeed just be you and your wife. Do not on any account allow a bank or solicitor to be a trustee. They will charge heavily for doing nothing, and will simply increase the bureacratic problems of securing agreement between trustees for any payments or investment changes.

The trustees do need to keep basic records, and record minutes of "meetings" to make any decisions. It could be important to be able to demonstrate that it is not a "sham trust", just an extension of your own personal property, but a separate entity in its own right.