Managing a personal injury settlement – what to consider
At Wards, we put the needs of our client's first and that includes safeguarding our clients' best interests before and after settlement of a claim. In most cases, once a claimant recovers damages, no further legal help is needed. However, there are instances where additional advice and legal help may be required if the settlement is for a substantial sum or if our client is vulnerable. In such cases, we take a cross-disciplinary approach that brings together specialists in our Accident and Injury, Wills and Probate, Trusts and Court of Protection teams.
If a Claimant lacks mental capacity to make financial decisions, the Court must give its approval to any proposed settlement in order for a claim to be finalised. This can be because the Claimant is under 18 (in which case they are legally regarded as a child), or because they lack capacity under the Mental Capacity Act 2005. This could be due to illness or injury, such as dementia or traumatic brain injury. We routinely apply to the Court for approval as part of a claim.
Appointment of a Deputy
If someone lacks mental capacity to make decisions in relation to their financial affairs, whether or not that is caused by the accident, a litigation friend - usually a loved one - can provide instructions on their behalf. We will obtain a formal mental capacity assessment. If there is not an existing Power of Attorney in place, before settlement is approved by the Court, we will apply to the Court of Protection to appoint a Deputy or Deputies. A Deputy is someone who manages the financial affairs of someone who lacks mental capacity to do so. This can be a family member or a professional (such as one of the Partners at Wards).
The purpose of appointing a deputy is to safeguard the best interests of the Claimant and ensure that the compensation is used in their best interests. This is particularly important in cases where there is a larger award of damages, such as catastrophic injury cases where there is often a substantial element of future financial loss, including regular equipment, accommodation and care costs, and future loss of earnings. For those clients, having someone appointed by the Court to ensure that the damages is spent properly on their behalf is vital to their long-term security and quality of life.
Setting up a Power of Attorney
There are situations when it is essential to put in place a Lasting Power of Attorney for clients who may have deteriorating health conditions, and we work with our Wills and Probate team to put this in place. This is particularly important if the Claimant's injuries or an existing health condition is likely to lead to a loss of mental capacity, either before or after the conclusion of the claim.
For example, a claimant who has been diagnosed with early symptoms of dementia may have mental capacity to make decisions at the start of the claim but the condition is very likely to worsen over time, possibly quite suddenly. Therefore, it is important that a Lasting Power of Attorney is set up while the client has mental capacity, to ensure that their best interests are met in accordance with their wishes.
I remember clearly one client of mine who suffered from severe asbestos and whose condition was slowly deteriorating. Medical expert evidence stated that his condition would worsen until, in the last weeks or months of his life, he would likely lose mental capacity to make decisions for himself. Working with colleagues in the Wills and Probate team, a Lasting Power of Attorney was put in place to ensure that his wishes and needs were met financially and in terms of treatment and end of life care.
Preparing or updating a Will
We would always recommend that everyone make a will and keep their will up-to-date to reflect their current circumstances. However, this becomes even more important when receiving a large award of damages, especially if the client suffers from a life-shortening condition.
Having an up-to-date will ensures that the damages, along with the rest of the estate, is dealt with in accordance with a client's wishes. Our specialists in our Wills and Probate and Trusts team can advise on estate planning and minimising tax liability to ensure that as much of the settlement as possible goes to beneficiaries.
Independent financial advice
When a client receives a significant sum of money, we would always recommend obtaining independent financial advice. Wards has strong relationships with local independent financial advisors who we refer clients to, who will provide a free initial consultation on how to best invest an award of damages.
Wards do not give or receive any commission or referral fee to IFAs. We will only ever make a referral to an IFA who we are confident will provide the best service possible in the best interests of our client, and only if we have our client's permission to do so.
Personal injury trusts
Some clients - particularly those who have suffered a long-term loss of earnings as a result of their injuries - are reliant on state benefits. Consequently, a loss of those state benefits could be disastrous. Once settlement has been reached, we can avoid this loss by setting up a 'Personal Injury Trust'. The damages are then paid into the Personal Injury Trust for our client's sole benefit. Those damages cannot then be taken into account by the government when considering a client's eligibility for means tested benefits.