I'm looking for some help on the following case.

Client received £30,000 from criminal injury compensation.

She is in receipt if IS. I have looked at the possibility of placing this money in trust in order for it to be disregarded as capital.

I am aware that Para 12 of Sch 10 of the IS regs allows for an unlimited disregard of the value of a trust fund deriving from compensation in respect of a personal injury (which can include a criminal injury.

Has anyone experence of a similar case? What type of trust should this be? Can the trust make regular payments to her and if so will these be treated a income or capital?

Para 12 of Sch 10 sound too good to be true. I await some bad news!

Barry, according to the dept here that deals with these PI trusts, ideally this money should have been placed in a trust before the client got it but it can still be done afterwards. The claimant will lose means tested bens until the trust has been set up but then should be paid benefit again. They can have access to the money which should be disregarded for benefit purposes as long as it's not used for items that would be covered by IS - in other words not to pay for daily living expenses.
Sue

Thanks for the information Sue.

Very helpful

Barry

Just thinking this through, if the PI trust is set up after the money has been paid to the client, isn't there a risk of a finding of deprivation of capital? The risk seems especially high if the only reason for setting up the trust is to make the damages payment disregarded in order to obtain access to IS.

DWP guidance in relation to HB (which I am more familiar with) certainly states that converting money into a form which falls to be disregarded should be treated as deprivation (which is somewhat supported by R(SB) 40/85 at para. 8).

May be worth considering.

I wasn't too sure myself about this as I had always assumed once they'd received the damages then would be depriving themselves if they placed it in trust afterwards. I therefore queried this with the dept here which deals with these types of PI trusts. They say they have done a few after the client had received the money with no subsequent problems with payment of means tested benefits. I'm still not convinced I've been given the right info and will get a second opinion and get back to you.

I think I've got this right now - see the Social Security Legislation Vol II - IS (Gen)Regs 1987 reg 51.1a. Sched 10 para 12. The notes (pp635/6 of 2003 ed) state this can be done and I quote "...it is not necessary for the (p.i.) trust to be set up before the compensation is received...".

I then even went so far as having a word with a friendly local DM who's first reaction was definite deprivation but she went throught he regs with me and now agrees.

Weird or what? It's a bit incredulous - like the AIPs and a disregarded £10m lottery win the day after...I still can't really get my head round it.

Sue

Sue,

You are, of course, correct; reg 51(1)(a) refers. Sorry for confusing matters.

I wonder what the position would be in relation to Housing Benefit (which is obviously not relevant in this case if IS is being awarded)? Regulation 43 of the HB(G)R 1987 don't appear to have anything similar to reg 51(1)(a) preventing a finding of deprivation of capital because of the setting up of a PI trust fund... any thoughts?

And, yes, it certainly is weird. This probably explains why the means testing for pension credits now exempts personal injury payments, whether on trust or not, entirely in the calculation of capital.

... which is surely the only logical thing to do?? The intention of the capital disregard in this case is surely to make such awards untouchable. Has anyone really set up a trust to benefit someone else???

A client I had who got a CICA award was actually sent details of trust fund providers with the award, and I was under the impression that it was not possible to set up a trust before an award was made (different to a PI award where a solicitor would hopefully advise you to do so as the case progressed, but even in that case you could get a period of non-entitlement to IS when the solicitor had the money but had not transferred it to the trust).

... which is surely the only logical thing to do?? The intention of the capital disregard in this case is surely to make such awards untouchable. Has anyone really set up a trust to benefit someone else???

I guess the logic was to encourage people to put these awards into trust so that the specific money which was 'person injury' money could be identified. Otherwise, it is difficult to know whether capital held is derived from that personal injury payment, or not.

I guess you're right!