Understanding Personal Injury Trusts for children

When a child is awarded significant compensation for personal injury, it is often recommended that the money be placed into a minor Personal Injury Trust (PIT).

A minor Personal Injury Trust, also known as an Infant Settlement Trust, is a legal arrangement used to manage compensation awarded to a child under 18.

How to decide if a minor Personal Injury Trust is appropriate

Whether a minor PIT is appropriate depends on whether the child is anticipated to have the capacity to manage their finances in the future.

If it is anticipated that they are unlikely to have the capacity, then a Deputyship application is needed. However, if it is too early to determine whether a minor is anticipated to have the capacity to manage their finances upon turning 18, a PIT should be explored.

What happens to compensation funds without a PIT?

Without a minor Personal Injury Trust, settlement funds for children are held ‘in court’ until they turn 18. The funds can then be released upon request by the child’s (the Protected Party or ‘P’) ‘litigation friend’. This is often someone with parental responsibility (common requests include education or care provision needs).

As part of this request, the court will require written evidence showing how the money will benefit P. The court will then review the request and, subject to any follow-up questions, approve it if they are satisfied the funds are being used for P’s benefit and in their best interests. This can take a matter of weeks to be processed.

Having a PIT means the funds are more accessible. Another benefit of setting up a minor Trust is that it provides more flexibility, often allowing better investment opportunities. This allows the trustee, subject to financial advice, to invest the funds in a more tailored way to ensure that P’s financial needs can continue to be met in the long term and as they transition into adulthood.

Safeguarding

The benefits of setting up a minor Personal Injury Trust are the same as those of an adult Trust. However, when setting up a minor PIT, there are additional safeguards in place. Whilst an adult Trust can be set up by preparing and signing a Deed, a minor Trust needs court approval, as a minor cannot approve the Deed themselves. This ensures that the Deed is prepared and executed in P’s best interests.

Depending on the level of compensation, further specialist advice may be needed before sending the proposed Trust to the court.

Who can be the trustees for a minor PIT?

As P is a minor, they are unable to act as a trustee. They can, however, step in as a trustee, should they wish, upon turning 18, so long as they retain the capacity to do so.

A trustee should be over the age of 18 and not have had any financial difficulties themselves, such as a CCJ or bankruptcy.

Those who have parental responsibility for P can step in as trustees; however, not everyone wants to take on this responsibility. Some parents prefer that someone else manages the Trust so that they can focus on supporting their child without the added stress of managing their child’s settlement. Selecting the trustees is a very personal choice and one that needs to be made in P’s best interests.

For significant settlements, it may be more appropriate to appoint a professional trustee.

What happens to a PIT when the child turns 18?

When the child turns 18, they will have the option to:

• Bring the Trust to an end;
• Continue it; or
• Revise it, for example, to add themselves as a trustee.

If the Trust was set up on the basis that they were anticipated to have capacity upon turning 18, but, on turning 18, they are assessed as lacking the capacity to manage their finances and make a Lasting Power of Attorney, then a Deputyship application would need to be made, and the Trust brought to an end.

When should a minor Personal Injury Trust be set up?

It is a good idea to set up a PIT before the child receives their compensation. This is usually something your solicitor will advise you on during your personal injury claim, and our Court of Protection team can help set this up for you.

Setting up a Personal Injury Trust before settlement means the compensation will go into the Trust from the outset. This minimises further admin and assessments for benefits and Government funding. If you set up a minor PIT after receiving a financial settlement, you will be unable to claim back any benefits you did not receive before the Trust was set up.

Alternatives to Personal Injury Trusts

While minor Personal Injury Trusts are the most common way to keep a child’s compensation safe and secure, there are other ways, including setting up a Deputyship account. If you aren’t sure what the best solution is for your child, our Court of Protection solicitors can help.

Contact our Court of Protection solicitors

Our professional Trustees advise clients across the UK from our offices in Bedminster, Bishopston, Bristol city centre, Kingswood and Thornbury.

To speak to us about our professional Trustee services, call 0117 325 2929 or complete our online enquiry form.