Will Trusts: In the context of Personal Injury and Clinical Negligence claims

One interesting measure that we are advising our clients, especially those whose life expectancy has been significantly shortened, or simply as future financial protection for the family should the client die during their personal injury / clinical negligence claim is the area of Will Trusts.

As with a Personal Injury Trust (“PI Trust”), a main driver behind the creation of a Will Trust (i.e. a trust that is incorporated to the client’s Will) is to protect the surviving spouse or partner’s future entitlement to means tested benefits.

Without a Will Trust in place, if the client had put in place a basic PI Trust (which is the most common form of PI  Trust), on the client’s death the PI Trust would come to an end. The assets that were held in the PI Trust would thereafter be administered and distributed either in accordance with the client’s Will, or in accordance with the Intestacy Rules (if the client died without leaving a Will).

In the scenario, if only a simple Will had been put in place, it is likely that the surviving spouse or partner will be named as the sole beneficiary. If the surviving spouse or partner was in receipt of means tested state benefits or local authority support, this inheritance would aggregate with and increase the capital held by the survivor which would have a negative impact on his/her on-going entitlement to means tested financial support.

Instead, if the client had put in place a Will that incorporates an appropriate Will Trust, on his/her death the Will would establish a new trust (typically a Discretionary Trust) which will, in simplistic terms, replace the PI Trust. The Will Trust will thereafter ensure that the survivor’s inheritance is appropriately ring-fenced resulting in the survivor’s on-going entitlement to means tested financial support being maintained. In addition to maintaining entitlement to means tested financial support, a Will Trust can also provide other benefits, such as:

• An option to stagger or structure a child’s, children’s, or grandchildren’s inheritance.
• An option to differentiate between income and capital beneficiaries.
• An option to provide the beneficiaries with tax and estate planning opportunities.
• An option to provide the beneficiaries with capital preservation opportunities in the event of a beneficiary’s potential divorce or financial difficulty; or should the survivor require care.
• An option for the executors, trustees, and beneficiaries to take professional advice before deciding how best the trust should be administered and ultimately distributed.

It should also be noted, that if the client was unmarried at the time of their death and did not leave a Will, the surviving unmarried partner would have no entitlement to inherit the estate (which would include assets held within a PI Trust). It is therefore essential for a client who, perhaps is in a long-term relationship but who has no intention of marriage or civil partnership; in addition to other scenarios, to put in place a Will.

From the litigation perspective, if a client dies during a claim, it will be the executor (as appointed by the Will) who will have the authority to continue the claim on behalf of the estate. It is therefore important, when  putting in place a Will, that consideration is given to who  the client would wish to have this responsibility. We would also recommend that the client is asked about their Will  to ensure that, in the circumstance, the litigator is aware who the client has appointed as their executor(s) and where the original Will is stored. In contrast, if the client were to die intestate (without a Will), the administrator  as named on a Grant of Letters of Administration would be the person with the authority to continue the claim  on behalf of the estate. This could, from the ligation perspective, create uncertainty and delay until such time as a Grant is issued by the Probate Registry.

How PCS can help 

Our STEP qualified trust and estate planning solicitors will always consider the client’s wider circumstances. As we all know, money (whether from a PI award, business  sale or inheritance) sometimes creates its own problems, whether that is with the DWP, the tax authorities, divorce or your own family and children. We will look at appropriate legal solutions which best fit your unique circumstances.

Paul primarily advises high-net-worth clients, including wealthy families (across the generations), business owners, media personalities and sports professionals on their estate planning requirements.

Paul acts as a professional Trustee for a number of his clients and works closely with other industry professionals (including financial advisors, accountants and other  solicitors) to ensure that his clients are provided with well-rounded and holistic advice.