Managing compensation after a spinal injury

11 June 2021

After a spinal injury the long-term impact on your life and that of your families can be significant. You may need a care package, a new home or adaptations to their existing accommodation, therapies and specialised equipment.

Compensation awards are designed to ensure that you can meet these costs and should be preserved so that they last for your lifetime. However, in addition to all the other changes in your life this can feel like an additional burden and so you may wish to instruct a professional to assist you. Managing the compensation award is crucial to ensure that your long-term needs can be met.

There are two ways in which a compensation award can be managed; this will depend on whether you have capacity to manage an award:

  1. If you do not have capacity to manage the award then an application to the Court of Protection can be made to appoint a Deputy (or Deputies) to make financial decisions on your behalf. Capital received as a result of a personal injury that is managed by a deputy will also be disregarded from benefit and local authority means testing.
  2. If you retain mental capacity to manage your award a Personal Injury Trust can be created to hold and manage the compensation. The creation of a Trust will ring-fence the award so that your entitlement to means-tested benefits and local authority funding is preserved.

You may receive an interim payment during the course of your claim to assist with the management of on-going costs arising from your injury. Funds held by a person which have been received as a result of compensation for a personal injury will only be disregarded for the purpose of benefits for 52 weeks and this will run from the date of the first interim payment. As such, it is essential to place the funds into a personal injury trust or set up a deputyship as soon as possible.

What is a Deputy?

A deputy is a person appointed by the Court of Protection to make those decisions which you can’t make for yourself because you lack the mental capacity to do this.  The Court will usually appoint a family member but will sometimes appoint a solicitor; it is also possible to appoint more than one person so a family member could do this with a solicitor.  The deputy must always act in your ‘best interests’.  Most deputies are property and affairs deputies and they will make decisions on your behalf in respect of your finances, including your compensation award.  Very rarely, the Court will appoint a health and welfare deputy to make decisions about care and medical treatment.

The Mental Capacity Act 2005 explains exactly what ‘lack of capacity’ means.  You will ‘lack capacity’ to make a decision if you are unable to make that decision for yourself because you have an impairment of the brain due to a medical condition or a brain injury.  Capacity is task specific, which means that you may lack capacity to make certain decisions but still have capacity to make other decisions.

When making decisions on your behalf, the Court or the deputy must act in your ‘best interests’, which is explained in the Mental Capacity Act.  This means helping you to take part in the decision-making as much as possible.  It also means taking into account your wishes and beliefs and consulting with your family members, friends and carers. As part of this duty the Deputy must put a security bond in place, they must make sure they keep your money separate from their own and not spend your money on themselves as well as submitting annual reports explaining how your money has been spent in the past year.  If you have a large sum of money, your deputy should consider whether to invest it. 

Your deputy can only make a decision on your behalf if you lack capacity to make it yourself.  If you have capacity, then the decision is yours and the deputy cannot make it for you, even if he or she disagrees with you.

If you have a professional deputy for property and affairs, they will charge a fee for their services and this will be paid for from your money.  However, your deputy cannot just pay themselves as much as they like.  Every year, the deputy must send their bill to the Senior Court Costs Office, who will decide how much your deputy is allowed to charge. Your deputy will be supervised by the Office of the Public Guardian (OPG) and will need to report every year about what they have spent your money on.  The OPG will look at this report carefully and can ask questions or request further information. 

What is a Personal Injury Trust?

A trust is an arrangement whereby one or more persons (the trustees) hold money or assets for and on behalf of the person who is entitled to the benefit of that money (the beneficiary). It should be noted that the beneficiary can, and frequently does, act as a trustee of their own fund. It is possible to appoint a professional trustee to ensure the trust is managed appropriately. They will apply their own knowledge and experience to ensure that the funds create an income that will ensure your funds are preserved and can meet your needs over your lifetime.

Protecting your entitlement to benefits may be a key motive for setting up a trust, but there may also be other reasons or advantages in doing so. In particular the recipient of the award may:

  • be inexperienced or nervous of handling large sums of money;
  • need the protection that trustees can offer against wayward or ‘money-grabbing’ relatives;
  • prefer to delegate the responsibility and administration of the finances to a professional or third party without having to concern themselves; and/or
  • wish to try and ‘ring-fence’ the award against other issues such as bankruptcy and divorce.

In most cases, the simplest (and easiest to understand) form of trust will be sufficient but there are a number of alternative types of trust that could be considered. This is particularly so if what you are aiming to achieve is more complicated. The tax implications of creating a trust also need to be considered as the failure to take proper advice could result in significant and unexpected tax charges and other costs that could probably have been avoided.

A professional trustee will charge for their services but they will be able to offer you their expert advice and assistance with any of the issues that you may have. When they are appointed Trustees agree to act in the interests of the beneficiary, not themselves and have a number of duties such as ensuring they act within the terms of the trust, take reasonable care and keep records and accounts.

How can Kingsley Napley assist?

At Kingsley Napley, our particular expertise lies in managing cases of the utmost complexity, involving significant awards of compensation following either personal injury or medical negligence.

The decisions we become involved in will include routine spending decisions such as mundane but extremely important matters like paying your bills, ensuring you access all your state benefits, insuring your property, taxing your vehicle and making sure that you have access to sufficient money to meet your day to day needs.  In more complex cases, we may be responsible for employing a care team, working with care experts and specialist therapists or dealing with employer pension issues.

Beyond that, we may become involved in buying or selling property and working with experts to design and adapt that property to meet your needs. If you have substantial assets we will need to appoint an investment manager or work with your existing advisor to ensure your financial future is secure.

By taking the time to get to know you and your family, our lawyers will fully understand your specific situation so that we can tailor our advice to your individual needs. We will work closely with you, your family, your litigation solicitor, your case manager, your care team, your financial advisor or anybody else who has a direct interest in your well-being to provide a co-ordinated and wherever possible seamless service.

Our involvement should result in an improvement in how your finances are managed and therefore, by implication your lifestyle and circumstances. If not, then we are letting you down. We are committed to ensuring that this does not happen by always listening to you and acting in your best interests.

Whether you want to set up a simple personal injury trust, appoint a professional trustee or you need to appoint a Deputy, our Court of Protection and Deputyship team has many years’ experience of advising on all these issues. 

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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