the impact of personal injury compensation upon means tested benefits

In October 2006, the law changed in relation to awards of damages for personal injury and their impact upon eligibility for means tested benefits.  Examples of means tested benefits include Income Support, Council Tax Benefit and Housing Benefits.  Historically, personal injury awards could be treated as a ‘protected fund’ and disregarded when assessing an individual’s eligibility for some of these benefits.  However, this was dependent upon any such capital award being held in court or under a trust.

The change in the law simplifies matters somewhat and broadens the situations in which personal injury compensation may be excluded from an assessment for such benefit eligibility.

Since October 2006, personal injury awards held in court or under a trust remain excluded from consideration in assessing eligibility for means tested benefits.  Awards will also now be excluded from consideration where the capital is strictly to be used only by the order or direction of the Court of Protection.  In other words, the law is now wider and embraces as ‘protected funds’ awards invested (other than in court) privately in the name of the individual and awards held in a receivership account.

Those who do not have receivers appointed are given a period of one year in which they may set up their own trust, during which time, their capital award will not be taken into account in assessing eligibility for means tested benefits.

What about income generated from a personal injury trust, maintenance paid by virtue of damages and annuity income resulting from a personal injury award?  Further, what about interest or dividends paid out on the basis of underlying capital; are these still treated as capital?  All of these forms of income are now to be excluded from consideration in assessing eligibility for means tested benefits.

Alison McClure, Court of Protection Panel Receiver and Head of the Personal Injury practice at Blake Lapthorn said of the recent changes “These changes both simplify and clarify the law in this area and avoid the need for complex assessments as to what is income from a personal injury settlement and what is capital. Claimants whose financial affairs are not managed by the court should take prompt legal advice to see if they would benefit from setting up a personal injury trust”.

For further information please contact Alison McClure in the Personal Injury team on 023 8085 7345 or email alison.mcclure@bllaw.co.uk