A personal injury trust (PI Trust) is a legal mechanism where money arising from a personal injury or clinical negligence compensation claim is held by people called trustees, for the benefit of an injured or disabled individual (also known as the beneficiary).

There are numerous types of trusts which can be formed under the law. However a PI Trust is known as a bare trust and is distinct for the following reasons:

  • it is made up of funds only deriving from a payment arising out of personal injury/clinical negligence (compensation money, charitable payments, life policy insurance pay outs);
  • the person setting up the trust (called the settlor) will be the injured party (beneficiary);
  • that person will be the sole or one of the beneficiaries of the trust.

PI Trusts are most frequently created by those who have mental capacity to manage their own affairs.

On receipt of compensation money, it is very important to obtain advice on how to protect those funds. A significant benefit of compensation money being held within a PI Trust is that the money is excluded from assessments for means tested benefits and social services assistance. The ‘ringfencing’ of the fund in this manner, allows the injured party to continue to receive the benefit of that state funding, whilst using the PI Trust to meet the cost of additional needs.

When setting up a PI Trust, it is usual practice for a trust deed to be drawn up by a solicitor detailing the terms of a trust. Trustees can either be lay (for example family members or close friends) or a professional (solicitor) or a mixture of the two. There are various benefits to having your trust managed by a professional, especially if it involves investing and accounting for large sums of money. We can guide you through this important decision.

The powers of the trustees are generally contained in the trust deed. Legislation also sets the standard by which trustees should manage the fund, together with general trustee accountability.

Being a trustee is an important responsibility and trustees must ensure they meet certain legal duties. They must act honestly, with a duty of care and in accordance with the law. Of upmost importance, they must act in the best interest of the injured individual.

It is very important to choose the right trustees, as they will have full control over the PI Trust and the funds held within it. The trustees chosen must be able to work well together and act in the best interests of the person for whom the funds are held.