What is a Disabled Trust?
A Disabled Trust can mean two different things:
- another name for a Personal Injury Trust that contains money received as a consequence of personal injury or
- a trust founded to protect the interests of a disabled person generally.
A personal injury related Disabilities Trust is a trust created for disabled individuals, which is intended to supplement, but not replace, any means-tested benefits to which the disabled individual may be entitled.
Personal injury related Disabilities Trusts are established for working-age adults or some children who want to retain their entitlement to means tested benefits, now or in the future, such as:
- Income Support
- Housing Benefit
- Working Families Tax Credit
- Disabled Person’s Tax Credit
- Income Based Jobseeker’s Allowance
- Employment & Support Allowance
- Some care at home/in residential care
- Council Tax Support (for those of Pension age)
Under the current rules – if you have over £6,000 capital you are at risk of having some or all of your benefits reduced. If you have over £16,000 then you are at risk of losing them all entirely. If your compensation is paid directly to you, rather than put into a trust, then you will be classed as having this money as your disposable capital.
If you are expecting to receive more than £6,000 in compensation for your personal injury, then you should consider setting up this type of Trust. Even if you are expecting to receive less than £10,000 in compensation for your personal injury, you should still seek advise on whether to establish a Trust of this kind as it still may prove cost effective.
In other circumstances, a traditional Disabled Trust is usually founded by a third party for the benefit of another e.g. a child with a disability. It has certain tax and other advantages apart from fulfilling a protective function.
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