Personal Injury Trusts (PIT) are set up from funds following an award of compensation due to a personal injury or accident and are often seen as a complicated procedure, but this need not be the case. Our nationally recognised Court of Protection team answer five simple questions often asked about PITs.
1 A PIT with lay Trustees is simple and straightforward to administer
A PIT is not complicated to set up. We use a very simple document to ensure that you don’t need a professional to help you run the Trust. The process involves discussing and drafting the Trust Deed and obtaining signatures from the beneficiary, the person setting up the PIT (the Settlor) and by those appointed to manage the PIT (the Trustees).
Once set up, the Trustees would open and operate a Trust bank account to manage the funds and transactions would need to be agreed by the Trustees. As the sole beneficiary of the Trust, the Trustees are responsible for managing the funds for the beneficiary. There is no change to the beneficiaries tax code and no additional HMRC responsibilities.
2 A Trustee can also be a beneficiary of a PIT
At least two Trustees are needed to set up a PIT. A beneficiary can be a Trustee, as well as the Settlor beneficiary. The Trustees role is to manage the fund in the PIT for the benefit of the beneficiary. The selection of a Trustee is important as they will manage the award jointly with the beneficiary so care should be given on who is most suitable to take on the role.
3 You do not need to be on benefits to set up a PIT
Whilst a PIT will protect a beneficiary’s compensation award from being taken into account by the benefits agency when assessing entitlement to means tested benefits, it can also be set up even if the beneficiary is not on state benefits and should be considered when accepting any compensation received as the result of an injury or accident.
A PIT is a good way of ‘future proofing’ assets for a time in the future when the beneficiary may need to look at claiming benefits, for example if they get made redundant, go on long term sick leave, or need help from the local authority towards care home fees. It can also help if there is pressure by family members or friends to give or lend money from the beneficiary if they find out they have received an award of compensation.
4 Only funds from a PI award can be paid into a Trust
No other money can be paid into the PIT bank account. Payments can be made directly from the PIT bank account to pay for items or to reimburse the beneficiary who can receive funds from the PIT for general living expenses as long as their personal account balance (including that of any partner they may live with) is below the benefit thresholds. It is also possible to purchase a property and make investments with funds held within a PIT.
5 The PIT deed has power to remove Trustees and appoint new ones and can be wound up at any time
If there is a need to change Trustees in the future there is power to do that within the PIT document. It is also possible for the beneficiary to bring the PIT to an end at any time.
For more information on how we can help you set up a Personal Injury Trust, please visit:
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