Have you received compensation from a personal injury or medical negligence claim? If so, setting up a personal injury trust is often an opportunity too good to be missed.

A trust means simply that assets are held by one or more persons - the 'trustees' - for your benefit. The trustees can be friends or family members, or professionals.

What are the benefits of holding your compensation in a trust?

1. Future care costs

You can receive Local Authority funding towards care costs, and still benefit from the funds held in your trust. By comparison, without a trust you may need to use the compensation funds towards the cost of your care.

2. Means-tested benefits

A personal injury trust is entirely disregarded in the calculation of your entitlement to benefits.

3. Planning for Inheritance Tax

As house prices increase, more estates will suffer the burden of inheritance tax. If your compensation is placed into certain types of trust, it will not be included in your estate for inheritance tax purposes after seven years.

4. Protection on divorce

On divorce, all the financial resources can be taken into account in determining how the assets are divided. If your compensation is clearly ring-fenced and held in a personal injury trust, it will be easier to argue that the fund should be retained by you.

5. Safeguarding your compensation for the future

You may come under pressure from family or friends to use the funds to benefit others. The trustees of a personal injury trust can help to protect your compensation, so that it is set aside to meet your needs, whatever the future may bring for you.

  • Megan Seabourne is a partner at award-winning law firm VWV, which has offices in Clarendon Road, Watford