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Personal Injury – Discretionary Trust

Discretionary Trust

How can I protect my capital from my own irrational and impulsive behaviour to prevent my money being spent unwisely?

Client Circumstances

  • Mr Hugh has received £300,000 compensation from a serious accident
  • This has left him disabled, but mentally capable
  • He has spent money very unwisely in the past and does not want full control over this capital
  • He has sufficient income, but will require some capital from time to time

Recommended Solutions

  • Set up a Personal Injury Discretionary Trust for receipt of award, through a Solicitor
  • Appoint Trustees
  • Invest Trust capital in an Investment Bond wrapper
  • Asset allocation to meet Trustee risk profile
  • Diversify over a spread of four broad asset classes (UK Equity, Overseas Equity, Commercial Property and Fixed Interest)
  • Review and rebalance on regular annual basis
  • Ensure Mr Hugh has made a Will

Benefits from advice given

  • By setting up a Personal Injury Discretionary Trust, this will protect from means test and from Mr Hugh dipping in, without authority from Trustees
  • Provides simple reporting and administration for Trustees
  • Can use withdrawals from Bond if Mr Hugh needs some capital in the future (subject to chargeable event)
  • Flexibility to assign segments to Mr Hugh if required
  • Provides highly efficient tax wrapper
  • Can avoid need for tax returns by Trustees
  • A Will sets out who is to benefit from your estate after death

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Future Servicing

We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.

This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.

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