I’d be grateful for any views on the following issue.
I have been approached by a prospective client who received a personal injury damages award following a road traffic accident around 25 years ago. Upon receipt, the damages were placed into a dedicated building society account and were kept entirely separate from the client’s personal funds. The client confirms that no non-compensation monies have ever been paid into the account, the only increase in value being attributable to accrued interest.
Over time, the funds have been transferred between, and are now held, across two separate building society accounts. The client has made withdrawals from the damages fund over the years, but no personal funds have been mixed with the remaining monies in either account.
The client suffered a permanent disability as a result of the accident. He was not advised at the time of settlement to establish a personal injury trust.
He is now considering creating a personal injury trust and transferring the balance of the compensation funds, together with any accrued interest, into the trust. He is not currently claiming any means-tested benefits, although he does have ongoing care needs.
My question is whether there is any issue in establishing a personal injury trust at this stage, given the length of time since the damages were received and the fact that part of the original award has been spent. Provided the remaining funds can still be clearly identified and traced back to the original compensation payment (together with accumulated interest), is there any reason why those funds could not now be settled into a personal injury trust?
I appreciate that specialist welfare benefits advice would be required in relation to any future means-tested benefits claims or local authority financial assessments. My concern is whether, from a trust law perspective, the trust would be validly established and whether the remaining compensation funds could still benefit from the protections and advantages typically associated with a personal injury trust.
Has anyone encountered a similar situation, or can anyone point me towards any relevant authority, guidance or commentary on this issue?