What is a medical negligence compensation protection trust?
A medical negligence compensation protection trust is a trust that is set up from compensation paid as a result of a medical negligence claim. It is a legally binding arrangement for holding and managing the funds and must be managed according to specific rules.
A medical negligence compensation protection trust is usually managed by two or more trustees or a trust corporation. The trustees should make decisions together about the management of the funds, including any payments made out of them.
Do I need a trust to protect my compensation?
A trust allows someone who has received compensation to hold and manage their funds to ensure those funds are not taken into account for assessment of means-tested benefits or care contributions.
A trust can also help people who might be vulnerable, young, old or simply unfamiliar with managing a large sum of money. A trust may not be necessary for everyone, though the advantages and implications of not using one should always be considered.
Why should I set up a trust?
In most cases where an award of compensation is large enough to impact upon benefits, a medical negligence compensation protection trust can be a sensible way to manage the money. There is a 52 week grace period that begins on receipt of your first payment whereby the initial payment cannot be included in means testing for benefits or care contributions. This grace period does not apply to later payments. If after this 52 week grace period you do not want your compensation to be included in any Department for Work and Pensions (DWP) and local authority means testing you can hold the funds in a trust.
When deciding whether to use a trust, you should consider the thresholds for benefits and care contributions. The advantages of a trust include maintaining your means tested benefits and care costs, as well as providing help with managing your compensation. The cost of not setting up a trust could be the loss of means tested benefits and local authority financial support for care.
When should I create a trust?
The trust should be set up before the expiry of the 52 week grace period and in some circumstances can be set up before receipt of the first payment.
Can anyone set up a trust?
If the injured person lacks capacity a trust can be set up on their behalf by the person who has Power of Attorney or a Guardianship order. If the injured person is a child, then their parent can set up a trust for them.
