Disabled Trusts

What is a Disabled Trust?

A Disabled Trust can mean two different things:

  1. another name for a Personal Injury Trust that contains money received as a consequence of personal injury or
  2. a trust founded to protect the interests of a disabled person generally.

A personal injury related Disabled 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 Disabled 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 a Disabled 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 Disabled Trust 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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