If a claimant has received any payment as a result of a personal injury they have suffered they should consider setting up a personal injury trust. As we all know, benefits are a hot-topic at present and a personal injury trust can be the best way to preserve a claimant's entitlement to these.
Once a person owns capital between £6,000 and £16,000 their means-tested benefits will be reduced on a sliding scale. Frequently, following a personal injury a claimant will not be able to work and so may be entitled to such benefits. Furthermore, payment from a personal injury claim will often increase a claimant’s capital to above the £16,000 threshold and so thought needs to be given as to how this entitlement can be protected.
The temporary solution to this is reliance on the '52 week disregard'. Under paragraph 12A of Schedule 10 to the Income Support (General) Regulations 1987 (SI 1987/1967) (Income Support Regulations) funds from compensation for personal injury can be held by or for the claimant for 52 weeks before they will be taken into account for the purpose of means-tested benefits.
This can be of benefit where a personal injury trust is not required; for example, the full amount of the proceeds of the claim is likely to be used up in that first 12 months without infringing the legislation concerning intentional deprivation.
However, total reliance on the disregard comes with risks. This 52 week period starts on the date that the claimant receives their first payment in respect of that personal injury. This therefore includes interim payments made for the claim but the wording of the legislation goes much wider than this. It can also include compensation payments from the Criminal Injuries Compensation Authority and the Motor Insurers’ Bureau and any proceeds from insurance such as critical life cover, for example. It does not matter how small the payment is. It is therefore easy for an individual to overlook when the period starts.
The laws around intentional deprivation allow local authorities to look for evidence of deliberate or intentional deprivation of capital when assessing eligibility for means-tested benefits. This may happen when a claimant transfers funds, such as their damages, to others so that they are below the thresholds and can therefore claim additional support. Therefore, if relying on the 52 week disregard, claimants must be wary not to dispose of capital in such a way which would preclude that disposed of capital still being taken into account when assessing their assets.
Furthermore, there is only one disregard period for each personal injury. This means that the clock will start running from the date the initial payment is made and future interim payments and the settlement do not have their own disregard periods. As soon as this money is received and the initial disregard period has expired, it will be taken into account for means-tested benefits. For the purposes of being received, this includes when it is first received in the litigating solicitors’ client account as they will be holding the funds to the claimant’s order.
From this, it is clear that although a useful tool, the 52 week disregard should be used with caution and often only a short term solution. It is often a transitory solution for dealing with payments made in respect of personal injuries until a personal injury trust is established. As we know, this means that whilst the funds are in the trust, they will be permanently disregarded for means-testing purposes.
The forthcoming welfare changes which come into force on 29 April 2013 will, in practice, have very little impact on the application of the disregard. One of the main changes to the benefits system is the introduction of Universal Credit. Under the legislation, the 52 week disregard will be replaced with a blanket 12 month period where any personal injury damages award will be disregarded. This merely clarifies the position as to whether a second payment made within the disregard period is also disregarded during that period.