When you receive a compensation award following the settlement of a personal injury or medical negligence claim, it may feel like any financial worries you have are over. However, without the right legal structure in place, that compensation could put your means-tested benefits at risk.
This brief article explains what Personal Injury Trusts are, how they work and what the 52‑week rule really means.
What Is a Personal Injury Trust
A Personal Injury Trust is a legally binding document that allows you to hold and manage your compensation award a bank account which is separate from your personal funds. This is not a “loophole” but a government approved structure to recognise the unique situation receiving a compensation payment impacts an individual.
A Personal Injury Trust ensures that your compensation award is ringfenced and disregarded when assessing eligibility for means-tested benefits. The money is managed by Trustees to ensure your compensation is not taken into account when deciding whether you are entitled to benefits such as Universal Credit, Housing benefit and Statutory Services.
Without a trust, your compensation may cause your present benefits entitlement to cease and can also stop you being able to obtain other valuable services such as free NHS prescriptions, free NHS sight tests and school dinners for your children.
If you do not receive means tested benefits at the moment, you may still want to consider a trust to protect your compensation affecting your entitlement to long term care.
Understanding the 52‑Week Rule
When researching how to set up a Personal Injury Trust, you may come across advice telling you that the Trust must be created within 52-weeks. The situation is more nuanced than this, and it is important to understand this rule and its implications.
There is no legal deadline to create a Personal Injury Trust. The 52‑week rule is a temporary disregard period that gives people breathing space to get their finances in order such as, by setting up a Personal Injury Trust. The 52‑week period starts from the first compensation payment received, even if it is a small interim payment.
You are still able to put your compensation award into a Personal Injury Trust after the 52-week grace period has lapsed, but the funds will be treated as personal funds until the trust is put in place. This means the money would be taken into account if you’re entitled to any means-tested benefits.
Spending Compensation money within the 52-week period
It is a common misconception that due to the 52‑week “grace period”, you are able to spend the compensation however you wish. However, benefit agencies are able to review the spending during this period. If they believe you have spent the money in a way to intentionally deprive yourself of assets in order to maintain or increase your benefit eligibility, they will apply “deprivation of capital” rules. This means they will treat your situation as if you still have money and will take these funds into account when considering eligibility for means-tested benefits. In short, you cannot protect your benefits by deliberately spending your compensation.
The type of spending which may attract negative attention would be giving away large sums of money to friends and family, making luxurious purchases when there is no clear need and rapidly depleting funds after they are received.
This is not to say that you cannot spend the money during the 52-week period, you are able to spend the money in a reasonable way to meet any care and rehabilitation needs, or to address any loss of earnings suffered due to the claim.
How we can help you
At Enable Law, our Mental Capacity team has extensive experience supporting individuals and families following a serious injury, including helping clients protect and manage compensation awards through Personal Injury Trusts. We understand that receiving compensation is only one part of the journey, and that ensuring those funds are safeguarded for the future is essential.
We recognise how overwhelming it can be to balance financial decisions with ongoing care needs and benefit considerations. Our team provides clear, practical and compassionate advice on setting up and managing Personal Injury Trusts, always placing the individual’s wishes, feelings, beliefs and values at the centre of decision-making, while carefully balancing safety, dignity and long-term wellbeing.
If you need guidance on protecting your compensation, navigating the 52-week rule, or managing finances for someone who may lack capacity, our specialist team is here to support you every step of the way.
To speak to a member of our Mental Capacity team, call us for free on 0800 044 8488 or fill in our contact form so we can call you back at a time convenient for you.
