If you are considering making a claim for compensation for medical negligence, or another type of personal injury compensation claim, what happens to your benefits? Will they stop being paid as soon as you receive your compensation or is there a way that you can keep receiving them and keep your compensation?
What Benefits Might You Lose?
If you receive compensation the money will mean that you might lose any means tested benefits that you are currently receiving. Means tested benefits include the following:
- Housing benefits.
- Low income benefits such as Income Support.
- Council tax benefits.
- Working families tax credits.
- Disability benefits such as tax credits.
- Jobseeker's allowance
Are you receiving one or more of these types of benefits (or likely to in the future - see below)? If the answer is yes, you may well lose these benefits as soon as you receive a compensation cheque, depending on how much you receive.
What If You Might Receive Benefits In The Future?
If there is a likelihood that you might need any of these state benefits in the future then you should also consider setting up a Personal Injury Trust for your medical negligence compensaiton.
What Financial Limits Apply To Your Benefits?
If you receive in excess of £6,000 your benefits may be reduced, but if you receive in excess of £16,000, your benefits are likely to be stopped completely.
What Can You Do?
One option that can allow you to keep your compensation and your benefits is to set up what is known as a 'Personal Injury Trust'. This is a form of legal document that protects your compensation and allows you to carry on receiving your benefits and to withdraw money from your compensation when you need it. A personal injury trust might also be called a 'compensation trust', a 'benefit preservation trust', a 'special needs trust' or a 'supplemental needs trust'. Whichever name it is
using, it has the same meaning. So how does it work?
How Does A Personal Injury Trust Work?
Despite the name, a personal injury trust can be used for all types of compensation claims, including medical negligence claims. You set up a legal trust for the compensation fund and have two trustees appointed who will administer the trust fund. Once it is set up, the benefits agency will be informed about the trust but it will not stop your benefits.
When you want to remove any money from the trust to spend it, for whatever reason, your trustees will have to provide their consent. This rarely causes any difficulties as you decide who should be the trustees when you set it up (and they can be changed at a later date if necessary).
You should not use the trust to pay a regular monthly payment as this will appear to be an income which could prevent you from receiving benefits. You should really only use the trust to make one off purchases for (holidays, LCD or Plasma Televisions etc). However, you must always remember that having more than £6,000 in your all of your combined current or savings accounts (excluding the trust account) may mean that your benefits are reduced or stopped. This does not apply if a large sum is released for a capital payment (e.g. such as when you are buying a car). However, it is usually sensible in these occasions to buy the item directly from the Trust fund to avoid any potential challenges over your benefits.
