Personal Injury Trust (PIT) – what is it and how does it work?

Personal Injury Trust (PIT) – what is it and how does it work?


 If you have received a payment of compensation for a physical or mental injury you have suffered, you may cease to be entitled to state benefits.  A rough guide is that someone with more than £6,000 in savings is at risk of losing means-tested benefits and where they have £16,000 or more, they will lose means-tested benefits. However, benefits are in transition at the moment, and it is important not to rely on these figures when making a decision – you need to take advice on your own position.  If the compensation in placed in a trust, the value of your award will be disregarded when you make benefits claims, and you can also protect it and yourself from the influence of family, friends and rash and hasty decisions.

A Personal Injury Trust (PIT) can protect entitlement to benefits if it is set up within 52 weeks after receiving money towards or in full settlement of your claim. It is best to set the trust up as soon as possible, ideally before your compensation payment has been made.

That payment may be an interim or final payment from an insurance company or in some circumstances it may be a payment from another source. It is important to act promptly when you know a payment is due to be made.

As the Trustees of the PIT are the legal owners of the money and thereby control it, choosing them carefully is important.   The money (or investments and property which represent it) in the PIT is also known as the Trust Fund. The Trustees manage the Trust Fund in accordance with the trust deed, pay any tax that becomes due and decide how the funds should be invested, as well as manage when and if they should be paid out or applied for your benefit.

You will need a minimum of two Trustees, but you can appoint up to four.  In some cases, you can be one of the Trustees.  If a Trustee dies or is no longer able to act, they can be replaced.

Your Trustees must be over the age of 18 years. You should choose people that you are confident will act in your best interests and who are good at managing paperwork. You may want to consider family, friends (unless you feel there may be a conflict of interests) and a solicitor and/or accountant if it is substantial compensation.

The Trustees will set up a bank account and other investments where it is appropriate to do so.  They may need to take advice from a financial adviser.  All Trustees would need to sign any cheques or authorities required to release funds. You would need to speak with the Trustees to explain when you need money.  With a bare trust the Trustees will make payments as and when you direct/request them.   With a discretionary trust, the trustees may need to understand the reason why funds are being requested before agreeing to make a payment.

It not always advisable to for the Trustees to make regular payments to you as this can may mean your resources regularly exceed to capital limits for benefits.  It can mean losing and then reapplying for benefits on a frequent basis.  The Trustees can make payments to third parties in respect of any need you have or services that you will benefit from.  For example, the trustees can make making payments to providers like physiotherapists or carers for services they deliver to you.

You cannot put other money than the compensation for your personal injury into the PIT.

Generally, the payment of the compensation is not in itself an event that will be subject to tax.  Thereafter, the annual income earned by the fund will be taxed.  The Trust will need to complete separate tax returns, unless it is a bare trust.  Income tax and capital gains tax may need to be paid.Some trusts for disabled and vulnerable people and children benefit from a special tax treatment which means they may pay less tax.  It is important to complete appropriate election forms issued by HMRC to benefit from the special tax treatment.

How the PIT is ended will depend on the type of trust you have established. If it is a bare trust, you can give you Trustees written instructions to transfer the money to you. The Personal Injury Trust will then come to an end and the fund will form part of your own estate.  Bear in mind that when this happens, the money belongs to you and may affect your entitlement to means tested benefits.
If you have established a discretionary trust or a life interest trust, the Trustees will need to be persuaded that it is a good idea to bring the Trusts to an end – you may have used this type of trust to protect you and the money from impetuous decisions and from influence from other people.

If you have established a life interest trust or a discretionary trust, the PIT trust deed will show what happens to the remaining trust fund on your death.

On your death, the type of trust you have established will dictate what happens to the money left in the trust at that time.  If you have established a bare trust, on your death the fund will form part of your estate. This means that it will pass under your Will to the people you have named in the Will.  You need to remember this when you write your Will.  If you have not signed a Will, the trust money will be added to any other assets you have and will pass according to the Intestacy Rules.

If you have established a life interest trust or a discretionary trust, the PIT trust deed will show what happens to the remaining trust fund on your death.

When the person to whom the personal injury compensation is paid does not have the capacity to manage the award or is a minor (under 18 years of age) the Court will be asked to decide whether the award should be managed by Court appointed Deputies, or through a Court approved PIT with Court approved Trustees.

As compensation awards can be substantial, and even with smaller awards the loss of means tested benefits can have a devastating effect, it is always sensible to take advice on the options available to you or your vulnerable loved one at an early stage.

 

 

 

Phillipa Bruce-Kerr

Phillipa Bruce-Kerr

Partner at Harrison Clark Rickerbys

Phillipa Bruce Kerr is a Partner at Harrison Clark Rickerbys, who qualified in 1984 after completing her Training Contract with a firm based in London’s West End.

She moved to Harrison Clark Rickerbys from Foot Anstey in 2008. She is a full member of STEP and Solicitors for Elderly, a member of the Law Society’s Private Client Section and a Dementia Friends Champion.

She is also the Gloucestershire Regional Co-ordinator for SFE, and member of STEP’s Mental Capacity Special Interest Group.

She has advised on Estate Planning issues (Wills, Powers of Attorney and tax planning) for a range of clients including business owners and farmers.

She has always worked with Older and Vulnerable Clients and was a Panel Receiver, when there were such things.

She is both Deputy and Attorney for clients who need assistance in managing finances.

She has been involved in assisting to draft some of the SCOPE information sheets on Trusts and Wills and has spoken at their National Conferences.

Phillipa works with Care Professionals explaining the practical implications of legal documents and the Mental Capacity Act.

She also works closely with older and vulnerable clients and their families in strategies to support decision and delegated decision making.

She has an increasing workload of disputes over financial and health and welfare issues which are adjudicated by the Court of Protection. She believes clear explanations and practical solutions are the best way to assist clients.

In their spare time she and her family are currently supporting their perplexed dog who is constantly outwitted by the Pygmy Goats that have arrived recently. The challenges and rewards of pet ownership never cease.

 

https://www.hcrlaw.com/

 

Powers of Attorney – Why you should be careful who you trust with your finances

Powers of Attorney – Why you should be careful who you trust with your finances


Giving someone else power of attorney over your finances can be a useful means of ensuring that your affairs will be properly managed if you lose the capacity to do so yourself.

However, one case in which a war veteran’s money was plundered by a man he considered to be a friend shows how sensible it is to entrust such powers to professionals. The pensioner, who fought in the Second World War, granted his friend an Enduring Power of Attorney when he felt that his faculties were waning. After he developed dementia, his attorney used his position to fleece him of large sums of money. He used the cash to pay off his own debts, to buy supplies for his business and sold his house, war medals and family photographs before pocketing the proceeds. The pensioner’s family sounded the alarm. The man pleaded guilty to two counts of theft and was jailed for four and a half years. In dismissing his challenge to the length of his sentence, the Court of Appeal noted the emotional distress suffered by the pensioner’s daughter and wider family. The man had used his legal status to exploit the vulnerable pensioner and it was a nasty case, involving a grave breach of trust. In those circumstances, his punishment was neither wrong in principle nor manifestly excessive. In a case like this, the only redress the family will have is to try to recover their losses from the perpetrator’s assets. In practice, this isn’t easy as the sums taken have more often than not, been frittered away.

Using an individual of repute as your attorney means you can rely on them to act in your best interests and carry out the tasks involved in a professional manner.

Another case in which a son abused his position as an attorney to squander £230,000 of his frail mother’s money underlines the need to employ the right attorney to manage your finances if you lose the ability to do so yourself. The son used the authority his mother had conferred on him to take control of her finances after she developed dementia. He took the opportunity to sell her home which was her biggest asset and paid the proceeds of sale into his own bank account. By the time she died in a care home some years later, all the money had been spent. Although, by her will, the woman had left her estate to be divided equally between her two children, there was nothing left for her other son to inherit. After the dishonest son admitted theft, he was jailed for three and a half years. The facts of the case emerged as the Court of Appeal rejected his appeal against that punishment as misconceived. His plea that his mother had approved his expenditure during periods of lucidity was patently untrue and his sentence was appropriate.

You can protect your interests by ensuring that you ask a professional for advice on who is best to appoint as your power of attorney, and how to go about appointing them. You may perhaps consider appointing two attorneys to ensure there is a replacement, should your first attorney not be able to fulfil their duties. Alternatively, you can appoint a professional to act as your lasting power of attorney. By doing so, this will give you the added assurance that all legal issues will be handled appropriately.

 

Ravinder Sandhu

Ravinder Sandhu

Solicitor, at Sydney Mitchell LLP

Ravinder Sandhu qualified as a Solicitor in 2002 and has over fifteen years of experience in her chosen fields, the last few years being at Sydney Mitchell LLP. Ravinder deals with Wills and Inheritance Tax planning, Probate and Administration of Estates, Trusts creation and administration, creation, registration and use of Lasting Powers of Attorney, registration and use of Enduring Powers of Attorney, Court of Protection Applications. She is a member of the Society of Trust and Estate Practitioners (STEP) and is a fully accredited member of Solicitors for the Elderly.

http://www.sydneymitchell.co.uk/about-us/our-people/staff/ravinder-sandhu

http://www.sydneymitchell.co.uk

 

 

Becoming a deputy for someone who has lost mental capacity

Becoming a deputy for someone who has lost mental capacity


Sometimes, although you have tried to plan as carefully as you can for the future, something happens that throws everything up in the air – an accident, a sudden illness, an operation that goes wrong – and instantly, life looks very different.

When someone you love loses mental capacity – the ability to understand information and make important decisions about their own affairs – you may have to decide whether you need or want to become a Court of Protection (COP) appointed deputy to act on their behalf.

At an already emotionally bewildering, upsetting and stressful time, this inevitably means a lot of information to take in and process, soul searching to be done and difficult decisions to be made.

Keeping control

But if you are reading this article without a crisis to deal with, and still have time on your side, then the very best thing you, your spouse, partner or elderly relative can do is to set the wheels in motion as soon as possible to appoint an Attorney to look after your affairs if there is a loss of mental capacity in the future.

You can appoint an Attorney by making a Lasting Power of Attorney. There are two types. One covers financial decision making and the other personal welfare decisions like where you live, your medical care, your clothes, diet and so forth.

Although none of us like to think about this prospect, there are an estimated two million people in the UK unable to make decisions for themselves because of disability, mental illness, brain injury or dementia. It can and does happen.

Unfortunately, it isn’t the case that friends and family can simply take over – not having Lasting Powers of Attorney in place has far reaching implications. For example, you have no say in who the Court appoints as your deputy, the local council could be appointed if the COP turns down a deputy’s application and your family will end up having to pay extra to apply for and fund a deputyship.

But sometimes, sadly, the COP is the only avenue available.

So, what does being a deputy involve and what do you need to consider when thinking about becoming one?

Applying to become a deputy

Once it has been established that someone doesn’t have the mental capacity to manage their own affairs anymore, it may be decided that a deputy needs to be appointed by the COP to deal with their property and financial affairs. Sometimes, the court appoints a deputy to make personal healthcare or welfare decisions, but this is only in extreme cases.

If you don’t know whether the person concerned has an LPA set up or not, which is sometimes the case with elderly relatives, it’s important to check now before any application is made. Have a look amongst the person’s papers or if appropriate approach their solicitor. You can also search the registers of the Office of the Public Guardian which will show if they have a registered LPA or LPAs.

If they do have one, this will save a lot of time and effort because it will already be on record what they want to happen if they lose mental capacity. Sadly, this time has now come and helping put in place what you know they wanted can be comforting.
But if there isn’t an LPA, applying to be a deputy means you have to meet the legal criteria set out in the Mental Capacity Act 2005, obtain the relevant assessments and fill out the appropriate forms which can be a complex procedure. The person lacking capacity also has to pay for a Surety Bond – a form of insurance in case the deputy does the wrong thing with their finances.

What does a deputy do?

When you are appointed as a deputy, you will receive an order from the court setting out your specific powers in relation to the person who lacks capacity, depending on what, and how much help, they need.

You will get a number of certified copies of this document which will enable you to show them to organisations like banks and insurance companies when you need to discuss financial matters.
As a deputy, you must always:

  • Make decisions in the person’s best interests;
  • Only make decisions authorised by the relevant court order;
  • Apply a high standard of care when making decisions and involve the person lacking capacity as much as possible, considering any values or views they have expressed in the past.

If you are considering applying to be appointed as a deputy, taking legal advice can be hugely helpful as the application process can be stressful and time consuming. It’s also possible that you might want to talk to a solicitor about appointing them as a professional deputy in situations where there is no-one else suitable or where no family members wish to take on the role.

Solicitors who are members of SFE have demonstrated specialist knowledge about COP matters. They have undertaken specialist training in older client law to attain the Older Client Care in Practice Award. All members follow a strict code of conduct, so you can feel confident in the advice you are receiving.

Jenny Pierce

Jenny Pierce

Head of the Wills, Probate and Mental Capacity team at Wards

Jenny is Head of the Wills, Probate and Mental Capacity team at Wards and specialises in Will writing, probate, long term care planning, capital tax planning, elderly client law & trusts and law relating to mental incapacity.

In 2015 Jenny was appointed to the Office of the Public Guardian’s prestigious Panel of Professional Deputies and is frequently appointed as a Professional Deputy for Property and Affairs, for vulnerable clients who lack capacity.  She also has a STEP Advanced Certificate in Advising Vulnerable clients.

In addition Jenny is:

  • A director on the board of Solicitors for the Elderly (SFE) 2018
  • The Regional Coordinator for Bristol & Bath Solicitors For the Elderly
  • A full Member of the Society of Trust and Estate Practitioners
  • A Member of Law Society Probate Section
  • The Winner of the Association of Women Solicitors 2010 award for the Best Woman Solicitor Managing a Probate Practice

LPA: An absolute right?

LPA: An absolute right?


Lasting Powers of Attorney (LPAs) are invaluable tools to assist and support people in need, if they are used correctly. Unfortunately, not every attorney who agrees to act for a relative or friend fully understands the limitations on what they can do. We see a lot of caring and considerate attorneys who are caught out, not because they are trying to take advantage of their position, but simply because they haven’t appreciated exactly what they can and cannot do.

Many people assume that an LPA or other power of attorney provides an attorney with an absolute right to deal with a person’s finances as if the attorney had stepped into their shoes, but this is not entirely true. Common and everyday transactions could easily result in problems if not dealt with correctly.

Consider the following situation. A mother appoints her son to be her sole attorney under a property and financial affairs LPA. She remains mentally capable of dealing with her own finances, and makes a number of generous gifts to her son and to his children, to help them with their housing needs. The mother then suffers a serious stroke, and is left unable to make her own financial decisions. At the same time, her granddaughter is buying her first home, and her son transfers £25,000 of his mother’s money to this granddaughter. The son believes that as his mother has always made gifts to the grandchildren in order to help with their housing needs, and because she was not in financial need for her care costs, this transaction would be acceptable. He was only trying to follow his mother’s wishes and be fair to all of her grandchildren.

Whilst this will sound perfectly reasonable to many people, the son should not have made the gift without first obtaining the authority of the Court of Protection. Attorneys have very limited powers to make gifts, being allowed to:
• Make gifts on customary occasions to persons related to or connected with the donor; or
• Make gifts to any charity to whom the donor made or might be expected to make gifts.

“Customary occasions” include births, marriages, civil partnerships and “any other occasions on which presents are customarily given within families or among friends and associates”. This does not include making inheritance tax planning gifts, even if the donor was in the habit of making gifts of that sort when they had capacity, and attorneys can’t decide to use gifts as a mechanism to even out or balance up perceived unfairness in gifts made by the donor when they had capacity.

The Public Guardian’s practice note on gifts available online at https://www.gov.uk/government/publications/public-guardian-practice-note-gifts/public-guardian-practice-note-pn7-giving-gifts-web-version is very helpful in this regard, and sets out guidance on matters that an attorney should consider before making a gift from the donor’s assets. I would strongly recommend that attorneys read this practice note, as well as making sure that they read the LPA form carefully, and look at the relevant sections of the Mental Capacity Act 2005 Code of Practice https://www.gov.uk/government/publications/mental-capacity-act-code-of-practice Ignorance of the rules that apply is not an acceptable excuse if an attorney acts outside of their powers.

Sofia Tayton

Sofia Tayton

Partner in the Private Client department at Lodders, and head of the Care & Capacity team.

Sofia joined Lodders as a trainee in 2001.  Her jobs before that included working on Saturdays at the haberdashery in Peter Jones and tending bar at the White Hart in Whitechapel.

Sofia is now a partner in the Private Client department at Lodders, and head of the Care & Capacity team.  She advises clients on powers of attorney, Court of Protection applications, care funding, wills, and estate planning.  Sofia also manages the financial affairs of people who are unable to do this themselves.

Sofia specialises in in the preparation and registration of enduring and Lasting Powers of Attorney, the appointment of Deputies and management of financial affairs, care funding and reclaiming care fees. She has a large variety of clients, although the majority are older and more vulnerable.

Sofia regularly present at seminars and events, and writes for publications on the work areas that she specialises in.

When is a half not a half? The problems of valuing a share in a property

When is a half not a half? The problems of valuing a share in a property


It is well known that, over the last ten years or so, it has been increasingly difficult for young people to get on the housing ladder. Even for those coming out of university with a good degree, there is often little option but to go back home and live with parents. Increasingly, for whatever reason, parents share not just occupation of the family home but also ownership. What happens when a parent goes into care? To what extent is the child’s occupation at risk?

In order to give some perspective, we need to remember that, in some circumstances, there is not a problem at all. For instance, where one parent and a child reside in the property with the other parent in care, the property is exempt from being used for care fees. Likewise, if the child is aged 60 or over. But what if a child owns the property with just one parent and the parent needs full time care? Or where two siblings own jointly, and one goes into care?

The problem can come when the local authority undertakes a financial assessment. Very often it will enquire about the value of the property, divide it into two and say that the resultant figure is available to the care home resident and should be used towards the care home fees. But is this correct?

The starting off point is to say that, when assessing a person’s capital- e.g. savings and property- it is the market value which is relevant. In a lot of cases this is easy. For example, one can just look at a statement to see how much is in a bank account. If the resident owns a property and no one else is living there, an estate agent can give a valuation.

But it isn’t quite as simple where a property is jointly owned. Here, the council should undertake a market valuation of the parent’s half share. In other words, what would a third person be willing to pay for that share? Bearing in mind that any buyer would have to share possession with the adult child, the answer may well be “not much”. Or, could the parent be successful in forcing a sale to obtain his/her money? Answer- it is hard to see how anyone, including the council, could be so sure that a court would order a sale, so it is difficult to see how the council could use this as a basis for valuing the parent’s share.

Accordingly, it will very often be the case that the market value of the half share will be far less than one half of the whole. If there are any difficulties with a council, a valuation can be obtained from a suitably qualified and instructed valuer. Just two cases I have been involved in will illustrate the point. In one, a property worth £230,000 was owned by a lady and her daughter in equal shares. The lady was in care and her share valued at £36,000. In a similar situation, a 60% share of a property worth £150,000 was valued at £15,000. A half is not always a half.

Philip Martin-Summers

Philip Martin-Summers

Consultant at Higgs & Sons

Philip Martin-Summers is a consultant with Black Country firm Higgs and Sons, which is widely respected both nationally and locally for its expertise in serving the needs of both private and commercial clients for over 140 years. Philip specialises in advising individuals and their families on a wide range of matters relating to care and care funding issues.

How to avoid challenges to your Will

How to avoid challenges to your Will


Although there is no way to prevent someone from challenging your Will after you die, there are steps that you can take to reduce the risk of a successful challenge.

Obtaining legal advice

Having a solicitor prepare and witness the signing of your Will should ensure that:

• The Will is carefully drafted;
• The terms of the Will reflect your wishes;
• The terms are legally enforceable and are capable of being implemented by your executors after your death;
• The Will is properly executed.

It may also reduce the risk of someone unduly influencing you into making the Will. This is because the solicitor will need to meet with you alone to verify that your instructions truly reflect your wishes and are not the result of pressure from an outside source (e.g. a family member or friend). An experienced solicitor will be aware of those issues and should address any concerns with you in detail.

Furthermore, it will be extremely difficult for someone to claim that the Will has been forged if the Will has been prepared by a solicitor and the same solicitor has witnessed it’s execution.

Obtaining a medical report regarding your capacity

Where you are elderly or vulnerable and/or there are concerns about whether you have mental capacity to make a Will, or even where a post death challenge is anticipated due to difficult relationships within the family, a solicitor will be able to assist you with instructing a suitably qualified medical professional to assess your capacity and prepare a report confirming that you have capacity to make a Will.

Obtaining evidence of capacity shortly before you make a Will will ensure that your executors have the best evidence should they face a post death claim against your estate on the basis that you lacked capacity to make the Will.

Leaving a small legacy to a potential claimant

In order to ‘head off’ a potential claim it might be worth leaving a small amount of money (a pecuniary legacy) to a potential claimant. Knowing that they will receive something from the estate may be enough to persuade them not to challenge the Will.

Including a ‘non contest clause’ in your Will

A non contest clause is a clause in the Will which is designed to encourage a person to refrain from taking action against the estate by threatening that any such action will lead to them losing their entitlement under the Will. Depending on the circumstances such a clause may be enough to dissuade a person from challenging the Will.

A non contest clause will only really be effective if you are leaving something to that person under your Will (see above) as they may not want to risk losing that entitlement if they bring a post death claim.

Such clauses need to be carefully drafted if they are to be upheld by the Court and so advice from a solicitor will be required.

Michael Culver

Michael Culver

Partner at Bolt Burdon Solicitors

Lisa Morgan is a Partner at Hugh James, a top 100 UK law firm, and head of the Nursing Care department.

She is regarded as an experienced and specialist solicitor leading in the niche area of continuing healthcare.

She has acted for hundreds of clients in England and Wales in challenging current and retrospective decisions to refuse NHS funded continuing healthcare to long-term nursing home residents.

Her department has successfully recovered over £100 million in wrongly paid nursing fees since its inception in 2006.

Lisa won the prestigious and highly acclaimed Law Society Junior Lawyer of the Year 2010 Excellence Award due to her work in an area largely neglected by the profession, for encouraging others to get involved in this field of law, and for the large amount of pro bono work and mentoring she undertakes. In 2015, she received the Cardiff Law Society Simon Mumford award.