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What happens when you receive a lump sum of money from a personal injury compensation claim at a time when you receive means-tested state benefits?

The answer depends on how you deal with the damages award.

The general reasoning, which is logical, is that the state should not financially support someone who has adequate resources of their own.

If a benefits recipient won the lottery or inherited a large sum, for example, they are legally obliged to inform the DWP who would re-evaluate the means and determine whether the person should no longer receive the state benefit or receive a reduced amount.

The general rule also extends to a person who gives away their capital in an attempt to keep their benefits.

This is known as deliberate deprivation and the capital given away is counted towards means regardless.

So, where does leave someone on benefits who receives compensation from an injury claim?

This financial lump sum is not regarded as a windfall – it is money to compensate for pain, suffering and to fund future expenses such as care or medical aids.

The law allows the compensation to be paid into a Trust and thus ignored for benefits purposes.

This post is not intended to deal with how to set up a Trust, nor the ins and outs of the other features of having the money held on Trust – there are tax advantages too.

The important point is that, if you are expecting a lump sum from an injury claim, there is a way of receiving it and keeping state benefits.

Acting promptly and doing it properly is key to success.

Richard Whitaker
Solicitor
Senior Litigator with the Association of Personal Injury Lawyers