Personal Injury Trust - Types of Trust

Types of Trust

A personal injury trust can be:

  • a bare trust where the money involved, the trust fund, is held for the injured party outright with administrative powers being given to the trustees. Upon the death of that person it forms part of their estate and passes under their will or under the law of intestacy which operates when there is no will.
  • a life interest trust where the trust fund is held by the trustees for the life of the injured party for their benefit and then after their death it passes to others under the terms of the trust.
  • a discretionary trust where the trust fund is held by the trustees for the benefit of the injured party and potentially others at the discretion of the trustees. The trust may continue or be wound up when the injured party dies.
  • a hybrid trust such as a flexible life interest combining features of the life and discretionary trust as desired.

The needs of the settlor, their family circumstances and tax or other relevant law should dictate the type of trust used. But whatever the legal type of the trust, if it is funded by an award of compensation for a personal injury then it will be a personal injury trust.

Personal injury trusts are sometimes referred to as special needs trusts but that expression is more general and can create confusion with certain trusts in other jurisdictions. A more accurate and informative alternative description might be compensation protection trust as that alludes to its actual purpose under English law.

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