Personal Injury payment 52 week rule

avk64

Hi,

Just wanted to get some clarity on the 52 week rule in regards to injury payments.
IF one has a payout of say £8000 and no other capital, this would take them £2000 over the £6000 threshold therefore affect benefit payments.

However £3000 of it will be used to pay off debts straight away. Does this mean that it gets disregarded as its done within the 52 weeks of receiving it even if there was say £2-3000 capital left at the end of the period? It would save the hassle of setting up a trust if so. 

Are there any problems that could be encountered and anything that needs to be done once payment is received?

TELLIT01

Which benefit, as that may make a difference to the answer. 

poppy12345

It depends what benefits you're claiming. If any of them are means tested then the money will only be disregarded if you put it in a trust fund. I don't believe it's disregarded for any other reason. https://www.quittance.co.uk/personal-injury/advice/general/does-injury-compensation-affect-my-state-benefits

avk64

It's for ESA benefit. They are also on Personal Independence payments and housing benefits and tax support. 

calcotti

Personal injury compensation payment is disregarded for 52 weeks and can be disregarded for longer if placed in a trust during this 52 week period.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf

52504 Any payment made because of a personal injury to the claimant or partner and not placed in trust is disregarded for a period

1. beginning with the first date of receipt by the claimant or partner of such a payment and 

2. ending when

2.1 the claimant or partner no longer has any part of the payment remaining (including where the claimant or partner has used any part of the payment to buy an asset) or

2.2 52 weeks have elapsed whichever is the sooner

52505 This 52 week disregard does not apply to

1. any subsequent payments made as a result of the same injury in DMG 52502 above, whether it is made by the same person or another1 (but the remainder of the existing 52 week period could still be applied) or

2. payments made from a trust where the funds of that trust come from a personal injury payment to the claimant or partner.

Normally paying off debt may be regarded as deprivation of capital depending on whether the debt is immediately due. and if you want certainty you would need to contact ESA and your local authority and ask them to confirm that they will not treat paying off the debt as deprivation of capital.

However I think the paragraph I have quoted above could be read to mean that you are free to do what you want with the compensation payment.

I think the rules for HB are similar to those or ESA quoted above.

avk64

Thanks for the reply. I found an article that said similar to what you mentioned. So it seems like the best course of action is to contact ESA and Local authority and see if they agree that paying the debts will not count as deprivation of assets - and get it in writing. IF they agree then that sorts that I guess. Its only £2000 or so over, pretty much the amount due on credit cards etc. 

Otherwise set up a trust fund? I've no idea what is a reasonable cost or even how access to money works. £400-500 is quite a bit of money. If one was to do this, can £5000 be immediately withdrawn without question?

calcotti

avk64 said:

Thanks for the reply. I found an article that said similar to what you mentioned. So it seems like the best course of action is to contact ESA and Local authority and see if they agree that paying the debts will not count as deprivation of assets - and get it in writing. IF they agree then that sorts that I guess. Its only £2000 or so over, pretty much the amount due on credit cards etc. 

Otherwise set up a trust fund? I've no idea what is a reasonable cost or even how access to money works. £400-500 is quite a bit of money. If one was to do this, can £5000 be immediately withdrawn without question?

I don't think setting up a trust is the route for you. If you set up a trust that means the money in the trust is disregarded, as soon as you draw some money I think that becomes capital. Even if £2,000 was taken into account it would only reduce the ESA by £8/week so setting up a trust would seem to be overkill.

avk64

calcotti said:

I don't think setting up a trust is the route for you. If you set up a trust that means the money in the trust is disregarded, as soon as you draw some money I think that becomes capital. Even if £2,000 was taken into account it would only reduce the ESA by £8/week so setting up a trust would seem to be overkill.

how long does it stay reduced for? Will they just reduce ESA, or will Housing Benefits also be reduced as well? It isn't much of a reduction to be fair compared to the hassle of a trust. 

SO I assume with the 52 week period, they look at how much you received in compensation, how much is left after 52 weeks and decide if the difference was purposeful deprivation or not then make a decision on that? And if they decide it was lawful then there would be no reduction if capital <£6000? 

And when should they contact ESA/LA, as soon as the money is received or later?

calcotti

avk64 said:

calcotti said:

I don't think setting up a trust is the route for you. If you set up a trust that means the money in the trust is disregarded, as soon as you draw some money I think that becomes capital. Even if £2,000 was taken into account it would only reduce the ESA by £8/week so setting up a trust would seem to be overkill.

how long does it stay reduced for? Will they just reduce ESA, or will Housing Benefits also be reduced as well? It isn't much of a reduction to be fair compared to the hassle of a trust. 

SO I assume with the 52 week period, they look at how much you received in compensation, how much is left after 52 weeks and decide if the difference was purposeful deprivation or not then make a decision on that? And if they decide it was lawful then there would be no reduction if capital <£6000? 

And when should they contact ESA/LA, as soon as the money is received or later?

There would be a reduction on HB also.

The reduction remains in place until capital falls below £6,000. The actual reduction will reduce over time because the capital is assumed to decrease by the the amount of the notional income. So if £2,000 is taken into account and benefit is reduced by £8, after 32 weeks the amount considered would drop below £1,750 and the deduction would then reduce to £7/week. I'm sure given the timescales there will be legitimate ways to spend the money.

However claimant is not expected to ring fence the money. They can spend it on anything reasonable such as replacing worn out belongings etc.

If they want certainty I would ask the question as soon as they have confirmation that they will be receiving the money.

DMG Chapter 52: Capital (publishing.service.gov.uk)

Have people deprived themselves of capital
Meaning of deprive
52815 The meaning of deprive is not a question of law and should be given its normal every day meaning. So claimants have deprived themselves of capital if they no longer have it even if they use it to
1. get
1.1 other capital or
1.2 personal possessions or
2. pay debts.
... 
Have people deprived themselves of capital for the purpose of getting benefit or more benefit
Onus of proof
52825 DMs have to show the claimant's or partner's purpose was to get benefit or more benefit if they decide claimants or partners have deprived themselves of capital. Getting benefit or more benefit may not be the claimant's or partner's predominant purpose but it must be a significant one. So when claimants give away all their capital to a relative just before claiming benefit their
1. main, or predominant, purpose may be to benefit the relative and
2. intention, or significant purpose, may be to reduce their capital so they can get benefit or more benefit. 
What the DM decides
52826 DMs have to decide if the claimant's or partner's significant purpose was to get benefit or more benefit. The DM has to make such a decision each time claimants or partners deprive themselves of capital. So if claimants have spent their capital on several things the DM has to decide the claimant's purpose for each act of deprivation.
52827 Normally there is no direct evidence to show the claimant's or partner's purpose was to get benefit or more benefit. So the DM has to consider all the facts of each case when making the decision.

Spoonie_Turtle

Unless I'm missing something, if it's disregarded then surely it makes no difference to any benefits and the person can do whatever they want with it during that time? Disregarded means from a means testing point of view it basically doesn't exist - it's not taken into account at all, for that period. Deprivation of capital and reduction of benefits would only come in if they were still over the £6000 threshold after the period of disregard. Or am I being dense?

calcotti

Spoonie_Turtle said:

Unless I'm missing something, if it's disregarded then surely it makes no difference to any benefits and the person can do whatever they want with it during that time? Disregarded means from a means testing point of view it basically doesn't exist - it's not taken into account at all, for that period. Deprivation of capital and reduction of benefits would only come in if they were still over the £6000 threshold after the period of disregard. Or am I being dense?

Not sure about that. I think it’s logical and tend to agree but if OP wants certainty they would need to confirm with authorities. Think for example of somebody who is not claiming benefits but gives away capital to somebody else, that can be treated as deprivation of capital if they later claim benefits.