Samantha Spain is a Solicitor in the Court of Protection department and specialises in assisting clients who lack mental capacity to manage their financial affairs after receiving compensation awards. In this blog, Samantha shares some helpful information about the processes around managing compensation settlements for children.
I have had a few enquiries recently from parents who have previously been a litigation friend for their child in a case that was settled on the child’s behalf but are no longer able to access their child’s money due to them reaching their 18th birthday.
The aim of this blog is to provide some useful information about the mechanisms available to manage a person’s financial affairs to avoid any difficulties when the child has turned 18 and continuing access to the funds is required.
Personal Injury Trusts
A personal injury trust can be used as a way to look after, and facilitate access to, a child’s compensation before and after they have turned 18.
When setting up a trust, in normal circumstances, the Settlor (the person choosing to put their money into the trust) must be over 18 years old and able to manage their own financial affairs i.e. must have capacity to make important decisions about their property and affairs.
However, the High Court has the power to authorise a trust for a child that is receiving a compensation settlement. This should be considered when the Judge approves a settlement for an injury as it gives the Trustees (the people looking after the fund) more flexibility in how the money should be spent for the benefit of the child (the Beneficiary).
If the money is not paid into a personal injury trust, it will go into an account with the Court Funds Office. This account pays a very low interest rate and will require the litigation friend to apply each time a withdrawal is required. When the child turns 18, the money will only be paid out to somebody with legal authority to access it (e.g. a Deputy authorised by a Judge in the Court of Protection).
It is important to note that even if a court-approved trust has been set up, the Trustees will only have authority to look after the funds received as compensation for an injury to the child and not the child’s finances generally. The child’s parents will still require an appointeeship through the DWP to look after disability and unemployment benefits and may later need a Deputyship Order if the child has other funds to manage (such as inheritance).
If it is clear that a child will not be able to manage their own financial affairs when they reach 18 years, then the Court of Protection can authorise the appointment of a Deputy.
A Deputyship Order provides wider authority to manage a person’s funds and not just their compensation for injury.
This is usually required when a person is turning 18 and they are due to receive a large amount of compensation but they are unable to manage their own money and will require significant assistance with, for example, a property purchase, investments, employing staff, etc. or if the person has other savings, income or property.
Who pays for a Deputyship?
If the reason that the child doesn’t have capacity to manage their affairs is because of an injury sustained by an act of negligence, then the costs of the child needing a Deputy to manage their affairs should be paid by the Defendant (the person or organisation that is being sued for the negligent act that caused the injury).
When the costs for the services of a Professional Deputy are agreed, they should include the court fees and also the annual charges that have to be paid to the Office of the Public Guardian, who supervise and monitor deputies.
It may be helpful to note that if your child’s claim settles and the costs of a Deputy have been included, then they are entitled to change their Deputyship to another firm or person providing that the Court of Protection approves of the change. You are not required to stay with the Deputy that is in place at the time of the settlement. However, there is a cost involved and all deputies must comply with the principals set out in the Mental Capacity Act 2005 and act in that person’s best interests.
The law of negligence in the UK specifies that when calculating damages you must ‘take your victim as you find them’. This means that even if the person had an existing injury or condition that means they don’t have capacity to manage their money, then they may be able to claim for the costs of appointing a Deputy if they wouldn’t have required a Deputy ‘but for’ their injury. This can include claiming the cost of the court fee for appointing a relative if a professional deputy is not required.
The key thing is to ask the lawyer who is dealing with the negligence claim to look at the issue of capacity whilst the case is ongoing. This should avoid delays and complications further down the line, as well as fees that were not accounted for being paid from the compensation after the case has been settled.
The laws around personal injury trusts and deputyships can be complicated, but our Solicitors are happy to talk to you should you require any advice. For more information, please contact our Court of Protection specialists on 01484 825 200.
Disclaimer: The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice, and the law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice on their own particular circumstances.