Sustaining an injury can be traumatic in numerous ways, going beyond the obvious pain of injury- whether it is a workplace accident, industrial disease or a road accident. You may not only suffer the pain and the inconvenience it reveals, but the condition can sometimes leave you unable to work (forcing you to take a leave or even lose your job due to the reduced physical abilities). That could mean that you may have to rely on state benefits for the disability you have gained or for the reduced income as a result of the injury.
However, this can be quite problematical for compensation in personal injury because the money you gain in a lump sum can affect the means-tested benefits you receive in a negative manner. So, how do you prevent this and retain your benefits when you get compensated? Well, in this read, we are going to take a look at the ways in which you can protect your compensation instead of utilizing it to replace your benefits for basic living costs.
We are going to cover:
- The meaning of testing
- The means that are tested and which are not
- The problem with benefits as well as compensation payments
- How to avoid utilizing your compensation settlement to cover your basic needs
- How to utilize a personal injury trust to keep your state benefits.
The Meaning of Testing
Testing in this context is where the government assesses your current capital and income to determine whether you’re eligible for particular state benefits. Capital includes cash and savings, stocks and shares, investments and bonds as well as additional properties. If you get a lump sum in the form of compensation and deposit it in your bank account, it will be counted as capital against some of your state benefits, thus reducing your entitlement.
Benefits that are Means Tested:
- Income Support
- Working Tax Credit
- Universal Credit
- Child Tax Credit
- Pension Credit Guarantee Credit
- Income-related employment & support allowance
- Reduced earnings allowance
- Benefits that are not Means Tested Include:
- Blind Person’s Allowance
- Attendance Allowance
- Carer’s Credit/Career’s Allowance
- Personal Independent Payment
- Constant Attendance Allowance
- Vaccine Damage Payment
- Disabled Student’s Allowance
- Disability Living Allowance
Means-Tested Benefits that Can be Impacted by Capital
Of course, not all means-tested benefits are impacted by savings as some are assessed on income terms only. However, for huge savings amount, you can be judged to have an income from the income that those savings generate. Things like tax credit as well as child tax credit, however, will not be affected by your savings
1. Income Support
You would receive these benefits in any of these situations:
- If you are on a low income and between the age of 16 and the age eligible for pension credit.
- If you are pregnant, a lone parent or a carer with a child under 5 years and in some situations unable to work because you’re disabled or sick.
- You reside in Scotland, Wales or England. Keep in mind the rules for Northern Ireland are different.
- You are on low income, working less than sixteen hours in a week and your partner works less than 24 hours a week. However, you are still eligible if you do unpaid work or do on paternity/parental leave.
- The capital limit before your income support benefit is affected is £6,000 of savings and the limit to lose entitlement is £16,000 of savings.
2. Income Based Jobseeker’s Allowance
You will get this benefit in any of these situations:
- On average, you work less than 16 hours a week.
- Your partner works less than 24 hours a week on average.
- You have at maximum £16,000 of savings.
- You also must have been paid on average less than £153 per week when you were employed over the past 24 months.
- You have not worked for the past 2 years
- You have been claiming contribution-based Jobseeker’s Allowance SA for over 6 months
- The capital limit before you lose entitlement to this benefit is also £16,000 of savings.
3. Income-related Employment & Support Allowance
You are eligible for this benefit if:
- You are sick or disabled in a manner that affects your ability to work properly. Here a work capability assessment will be conducted.
- You aren’t receiving Statutory Maternity Pay or Statutory Sick Pay and haven’t returned to work.
- You are not getting Jobseeker’s Allowance
- You are under the state pension age.
£6,000 of savings and above is the limit before the benefit is affected. Ideally, if you earn more than £115 per week from less than 16 hours up to a year or as long as you are in the designated support group, then your benefit may start to be affected. The capital limit before you lose entitlement is also £16,000 of savings.
4. Universal Credit
Universal credit replaced most of the benefits in 2017 including Housing Benefit, Child Tax Credit, Jobseeker’s Allowance, Income support and Employment & Support Allowance. The amount of savings allowed before the benefit is impacted and lost is the same as Income Support.
5. Pension Credit/Guarantee Credit
If you have reached the age eligible for state pension and have a low income, then Guarantee credit can be used to top up the income up to £155.60 a week. You can ideally get savings Credit as an extra payment if you have a pension. The limit before this benefit is lost is £10,000 in savings.
6. Housing Benefit
If you are on a low income and pay rent, you may be eligible for Housing Benefit which contributes towards the rent. If you have reached the pension credit age and have over £10,000 in the capital, this benefit may be affected. It can ideally be impacted if you have over £6,000 of savings and lost at £16,000 of savings.
7. Disability facilities Grant
If you have any form of disability and your home requires modifications in order to live there, you are eligible for this benefit. However, it can be impacted by savings of up to £6,000 and a person under the age of 18 cannot get this benefit, irrespective of their parent’s savings or income.
So, What is The Problem With Compensation Payments and Benefits?
If you get a settlement as a result of personal injury, depositing it directly to your savings account will mean that it can be counted as capital, which tends to reduce the number and amount of benefits you are entitled to. That means you will need to be smart and use the compensation sum to cover things like rent, mortgage, heating, food, and water until it is nearly used up, instead of utilizing it as it was intended.
That means that the purpose of compensation settlement is to take the place of state support at this point, instead of acting as a compensatory sum for another party’s negligence. After your savings go below the capital limit, you can become entitled to the state benefits again, but you will have spent all your compensation money.
How to Avoid Using Compensation Amount to Replace the Benefits
The government is going to ignore personal injury claims for the first year after getting the award, but the rules tend to be quite strict on how you use it during this period. You should not deplete the capital and then claim your benefits. If you purposefully give away the money or squander it after this period with the aim of retaining your benefits, then the government will treat you like you still have it.
However, you can maintain your settlement amount beyond 52 weeks without impacting your entitlement to state benefits. This is done simply by putting the compensation amount into a trust in personal injury claims. This trust can ideally protect your compensation award against fees in long-term care if there is a need to move into a residential care facility in the future.
How to Use Personal Injury Trust to Keep Your Means-Tested Benefits
You can use different types of trusts to set up a personal injury trust as long as:
1. You are the or one of the beneficiaries of the trust
2. The trust has at least two trustees
3. The money in the trust ought to be derived completely from your personal injury claim amount and no extra funds.
4. The trust fund has to be held in a separate account.
Trust law can be complicated and the type will depend on your situation, like whether you meet the criteria to be considered disabled, or whether the trust is for an individual with reduced mental capacity. The trustees make small and irregular payments from the trust and these amounts have to below the savings limit for your eligibility to state benefits, often £6,000.
It is advisable not to transfer any funds from the trust account into your personal account. That’s because it implies your settlement amount is no longer protected and can be subject to means testing for your state benefits. Let the trustees make the payments instead and you will be fine.
Lastly, it is essential to have a lawyer who specializes in TAC claims if you want a fair compensation.
Source: Courtesy of U-Law, TAC Lawyers