If you receive compensation for a head or brain injury, you may no longer be able to receive means-tested state benefits. Means-tested basically involves your income and savings being assessed. These benefits might include Income Support, Job Seekers Allowance, Housing Benefit and Council Tax Benefit. Currently some other benefits especially Disability Living Allowance are not means tested.
However, if your money is placed into a Special Needs Trust (SNT), you may be able to continue to receive means-tested benefits. The SNT needs to be set up before any compensation is received, if possible, and the terms of the SNT must be carefully worded to ensure your benefits can be retained.
What are the Basic Principles of a Special Needs Trust?
- The people in charge of the Trust are called "Trustees". Typically the Trustees may be you and your partner or other close friend or relative. This is particularly helpful if you do still need some help organising money because of your head injury, or are vulnerable to the influence of others who might want to share in your award! The Trustees hold your money on trust for you and will agree to transfer sums to you as and when you require. The Trustees are under an obligation to only use their powers for your benefit.
- The terms of a Trust are controlled by a document called a Trust Deed, which sets out certain rules and obligations.
- The Trustees will set up a Trust bank or building society account to hold your compensation award separately from your personal finances. The account should be set up in the names of the Trustees with a title such as "The Joe Bloggs Trust". All the Trustees must sign all cheques written on your account.
- You (and your partner) can then hold up to £6,000 (between the both of you) in your own right without it affecting your benefits. You can top up your own account from the money held in the Trust. You should not receive regular amounts from the Trust as this may be counted as additional income in relation to your benefits.
How Should I Use the SNT?
- Any income generated within the Trust, (i.e. interest on a bank or building society account), should be kept within the Trust bank or building society account.
- If you purchase any investments, or set up another bank account, these should be set up in the name of the Trust. Any income they generate should be paid directly into a Trust bank account.
- You can use the Trust fund to buy items paid for directly by cheque from the Trust. This cannot then be taken into account by the Benefits Agency when assessing your entitlement to means-tested benefits.
- You should keep all receipts for purchases made from the Trust or where you are seeking to be repaid from the Trust fund, so that you can produce these if the DWP or Local Authority should ask.
Other Points to Remember
- Further money received as compensation for a personal injury can be put into the Trust. No other money can be put into the SNT (such as savings from a job or winnings from a competition).
- You should take legal advice about what happens if you die, in terms of the money in the Trust. If you wish to consider this further then please do not hesitate to ask one of our own legal advisors.
- If you have any need to go into a residential care home, the money in the Trust will be exempt from being taken into account when assessing you for the fees.
- The cost of setting up a Trust can be paid from your compensation once you receive it.
- Personal injury award payments (including interim payments) are exempt for the purpose of means tested benefits for the first 52 weeks after they are received. However, this applies only to the first payment received as a consequence of your injury and the 52 weeks run from the date of that first payment.