Each very serious injury case is different. Before an accurate estimation of compensation can be given, a detailed assessment must be undertaken, and serious injury cases will usually include analysis of the following:
- Medical diagnosis
- Long-term prognosis
- Liability circumstances
- Past financial losses
- Future financial losses
- Living arrangements
- Care requirements
- Aids and appliances
- All other future costs
Assessing your immediate and long-term requirements is complex, but our expert serious injury lawyers will do everything to return your life to as close to your pre-injury levels as possible.
Your entire lifestyle aspirations should be taken into account. For example, if you wish to go on holiday once a year, consideration must be made to selecting appropriate accommodation, arranging adapted vehicles, accompaniment by carers, plus any other necessary extras.
For instance, if additional holiday costs (for carers, equipment and so on) come to £5000 per year and you hoped to go on holiday each year for the next 50 years this would amount to an additional cost of £250,000.
This is just one example of the level of detail a serious injury lawyer goes into when assessing the appropriate components of your claim and the correct level of compensation.
We are committed to finding the right type of settlement for our clients. Every case is different and we will use our experience, expertise and, where required, bespoke legal and financial advice to find the right solution. Please contact us to discuss your circumstances further.
Types of Settlement
A settlement for a claim or court action is reached in one of two ways: The court can decide on the appropriate damages to be awarded or more commonly, the parties agree terms voluntarily and without a court hearing.
Depending on the circumstances of the case, the type of settlement awarded to a claimant can differ, and there are three main types:
- Lump sum settlements
- Provisional damages awards
- Periodical payment orders (PPOs)
Lump sum settlements
Personal injury claims are usually settled with a ‘one-off’ damages payment to cover all elements of the claim, including:
- Compensation for injuries – for the claimant’s pain, suffering and loss of amenity
- Past losses – for example, previous care costs and loss of earnings
- Future losses – such as anticipated future care costs, future loss of earnings and future treatment costs
A lump sum settlement provides the injured person with the flexibility to use their funds in whichever way they feel best addresses their needs. In cases where the injured person is receiving means tested benefits, or may need to in the future, a Personal Injury Trust can be created to protect their benefits entitlement.
One disadvantage of a lump sum settlement is that there may be a temptation to overspend, to make poor investments, or even to run out of money by living for longer than expected. This potentially forces injured people to fall back on state support.
Provisional damages award
At the time of settlement, provisional damages can be awarded if a claimant’s medical condition is at risk of future deterioration.
In these cases, a lump sum award of compensation is considered inappropriate because the court is unable to predict such future events accurately. For example, after a serious brain injury it may be possible for epilepsy to develop in the future.
There can be uncertainty about how a condition may develop and affect the individual’s earning capacity, their life expectancy or future needs.
A provisional damages award addresses these issues by including:
- Damages for the initial injury or medical condition
- The ability to make a second application for additional damages should deterioration occur
Periodical payment orders (PPOs)
Traditionally, compensation for a serious injury has been paid to the injured person in a lump sum.
However, in recent years it has become increasingly common for compensation to be awarded in the form of a lump sum plus a ‘periodical payment order’ or ‘PPO’.
This is where a large proportion of the settlement is paid in annual instalments. This is often seen as a safer, more accurate and reliable way of compensating people after serious injury.
A periodical payment order is an attractive option to some claimants because it provides them with the security of an annual income for the remainder of their life and as a result, there is no risk that they will exhaust their damages.
In addition, PPOs reduce the large element of risk associated with the investment of large lump sum settlements.
Personal Injury Trusts
A Personal Injury Trust is an important and financially sensible arrangement for people who receive lump sum compensation payments after a serious injury.
This section of our website explains what a Personal Injury Trust is, how one may be beneficial, and how we can help you to create and maintain one.
Personal Injury Trust basics
- A Personal Injury Trust is a financial arrangement where an injured person/claimant chooses the people to look after and protect their compensation award
- The claimant is known as the ‘beneficiary’ of the trust
- Those people chosen to look after the trust are called ‘trustees’
- The compensation is kept in a trust-specific bank or building society account
- Only the trustees have access to the trust
- The trustees manage the money to ensure that it is invested and spent according to the rules of the trust
- One of the main advantages of a Personal Injury Trust is that it allows the claimant to remain eligible for means-tested benefits
- As serious injury cases can take a long time to reach settlement, it is advisable to set up a trust before any compensation is received and in the meantime interim payments can be paid in
- A Personal Injury Trust cannot be set up later than 52 weeks after any compensation is received
- Once the trust has been set up, the Department of Work and Pensions should be informed
Advantages of Personal Injury Trusts
A lump sum compensation payment is commonly awarded after someone has experienced a serious injury. This may include claimants who have been awarded instalments of annual or ‘periodical’ compensation payments, as they can also receive an initial lump sum payment for loss of earnings and certain other damages.
If a Personal Injury Trust has not been set up and a lump sum is paid into a personal bank account, the Inland Revenue will treat it as income received. Unfortunately, if the claimant then has over a certain level of capital they are likely to lose some or all of their entitlement to means-tested benefits.
Some people who receive a lump sum compensation award may not be currently in receipt of means-tested benefits. However, it is important to consider a point in the future where receiving benefits may become necessary. A lump sum compensation payment may not last forever, and it is possible that a claimant will one day need to consider benefits. Therefore, it is crucial to remain eligible, even after the receipt of compensation.
Meanwhile, Personal Injury Trusts offer various other advantages. They are particularly useful for seriously injured minors because parents or guardians can look after the compensation until they reach maturity. Some seriously injured people may even need to create a Personal Injury Trust to protect their finances from those who may not have their best interests at heart – an unfortunate and very rare occurrence, but not unknown.
Finally, the most practical reason for creating a Personal Injury Trust is simply to delegate the financial administration work to those with greater experience and understanding of how trusts operate.
Alternative names for Personal Injury Trusts
It is useful to note that the other names are often used to describe Personal Injury Trusts, but usually refer to the same thing:
- Benefits Protection Trusts
- Compensation Protection Trusts
- Compensation Protection Plans
- Special Needs Trusts
The claimant appoints trustees, and anybody can be chosen as long as they are at least 18 years-old. However, careful consideration must be taken when appointing a trustee, as they should always be someone who is trustworthy and who will be guaranteed to look after the compensation award.
In most cases, a trustee will be the injured person’s spouse or partner; someone within their family; or a close friend. Alternatively, trustees can be professionals in positions of authority who have experience of Personal Injury Trusts, such as lawyers.
Though there is no minimum, it is usually recommended that at least two trustees be appointed. The claimant will usually be one of them, meaning that they retain some control of the trust itself. The appointment of another trustee is made in order to help to make sound decisions regarding the use of the compensation, especially if the claimant lacks experience dealing with large sums of money or if they are incapacitated after a serious injury.
Trustees must keep continuous and accurate records of the trust’s income and expenditure, as well as a record of all assets and debts. This is because it is usually necessary to prepare and submit the trust’s annual accounts and tax returns. Whilst it is possible for trustees to complete the accounts and returns, it is more common for a professional to do this on their behalf.
The legal view on Personal Injury Trusts
The Department for Work and Pensions recognises that Personal Injury Trusts protect a claimant’s compensation award as well as their entitlement to benefits. It is a legal procedure, and one that is highly recommended.
If a claimant spends the personal injury compensation or gives it away without setting up a trust, their entitlement to benefits will still be affected. This is because the Department for Work and Pensions would view this as an attempt to lose the money quickly in order to defraud the state, a process known as ‘Deprivation of Capital’. The state will still treat the claimant as in possession of the money – regardless of whether or not they have spent it – and their entitlement to benefits will be amended accordingly.
Here at Serious Injury Law, our dedicated team of specialist lawyers will clearly advise and assist you for all of your Personal Injury Trust matters, including:
- Deciding whether or not you should create a Personal Injury Trust
- Setting up a trust bank account
- Assisting with the preparation of a suitably worded trust deed
- Helping with the completion of the trust’s annual accounts and tax returns
- Informing the Department of Work and Pensions of the creation of the trust
- Managing the trust correctly to ensure that entitlement to statutory benefits are protected
We have great experience of helping seriously injured people with their Personal Injury Trusts, and we will always follow the best practices in order to protect your assets.
If you would like more information about making a claim, please contact us to discuss your situation in confidence with one of our dedicated and understanding lawyers.