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Deputyship or personal injury trust?

Posted: 01/09/2021

Dealing with personal injury or clinical negligence claims can be challenging and the focus is generally on how to secure a compensation award for the injured party. However, securing the award is not the end of the matter, as the selection of the right option for successful claimants following an award also needs to be carefully considered and understood.

This article sets out the relevant options and their pros and cons for the specific circumstances of the injured party.

Common routes

If you or someone close to you have received a compensation award, the two most commonly recommended routes to manage that award are as follows:

  • Setting up a personal injury trust. This option is only available if the injured party is deemed to have the mental capacity to manage their property and financial affairs.
  • Making an application for a deputy to be appointed by the Court of Protection (COP) for property and financial affairs. If the claimant is deemed to lack mental capacity to manage their property and finances and there is no lasting power of attorney (LPA) in place, an application to the COP for authority to manage financial affairs will be necessary.  

There is also another uncommon option which is a hybrid of the two mentioned above. The hybrid option involves making an application to the COP for authority to set up a personal injury trust on behalf of an incapacitous person.

Mental capacity

The option to be pursued will depend on whether or not one has the capacity to manage their finance and property affairs. A fundamental principle of the Mental Capacity Act 2005 is the assumption of a person’s capacity to make decisions unless the contrary is proven. Additionally, a person must not to be treated as unable to make a decision unless all practicable steps to help them to do so have been taken without success.

Specifically, the law provides that someone lacks capacity if they cannot:

  • understand information about a particular decision
  • remember that information long enough to make the decision
  • weigh up the information to make the decision or
  • communicate their decision.


If a person is found to lack capacity to make decisions about their property and financial affairs, then the COP will usually appoint a deputy to do so on their behalf.

The COP has the power to make decisions on behalf of those who lack mental capacity to make decisions for themselves. However, the decision-making power in relation to property and financial affairs is usually delegated specifically to a financial deputy by an order (deputyship order) which defines the nature of the authority conferred.

A deputyship order normally give the deputy general authority to manage a person’s property and financial affairs such as taking possession or control of the person’s property or exercising powers of investment. An order may also give specific authority for certain types of decisions such as buying or disposing of property.

The COP can appoint lay deputies such as close relatives or friends or professional deputies such as solicitors or other professionals. Additionally, two or more deputies could be appointed for the same person.

Anyone can apply to be a deputy if they are 18 or over and they have the skills to make financial decisions for someone else.

Generally, if one has received or is due to receive a large compensation award, a professional deputy is preferred - either alone or jointly with a lay deputy - as they tend to be better equipped to deal with the complexities that may arise out of managing large sums of money.

Personal injury trusts

Although a capacitous recipient of a compensation award can simply manage their award themselves, it is usually recommended that they settle the compensation funds within a personal injury trust for the following three reasons.

  • to shield the sums received so that they do not affect the recipient’s entitlement to means tested benefits. Funds deriving from a payment made in consequence of a personal injury and settled into a personal injury trust are disregarded in the assessment of entitlement to means tested benefits;
  • to protect the interests of recipients who may be vulnerable for a variety of reasons;
  • to provide expert assistance, usually from professional trustees, in managing potentially large compensation awards.

Personal injury trusts will usually only have one beneficiary who is entitled to the income generated from the trust and the capital held within it. The beneficiary will normally act as one of the trustees and choose at least one more trustee. The other trustee can be a lay person over the age of 18 who is a trusted family member or friend or a professional trustee such as a solicitor. These trusts can also be set up on behalf of a child with court approval.

The hybrid option

Although it is possible to ask the COP for a personal injury trust to be set up for someone who lacks capacity to manage their financial affairs, the COP would need to be satisfied that there is good reason to favour the creation of a trust over a deputyship.

It was previously considered that a deputyship would always be preferred over a personal injury trust. However, more recent case law states that we should not proceed on the basis of such a presumption as the COP will carefully consider competing factors to decide what is in the recipient’s best interests. 

Deputyships or trusts?

The key factors to consider in deciding which option to pursue are costs, choice and flexibility, speed, accountability and scope.


  • It is generally cheaper to set up a trust than to apply for a deputyship order, as the latter requires a court fee.
  • The costs of a professional deputy may be less than the costs of a professional trustee as a deputy’s costs are calculated on hourly rates governed by the court. Deputy costs are assessed annually by the Senior Courts Costs Office to ensure that they remain reasonable and proportionate.

Choice and flexibility

  • The recipient of the compensation award will usually choose their trustees, which may not be the case in the appointment of a deputy.
  • In terms of involvement in decisions about how the award should be spent, trusts allow much more freedom whereas in deputyships, the authority of the deputy is limited by the terms of the deputyship order.


  • Decisions can be made faster with trusts, as the trustees only need to consult each other and formalise their agreement in order to go ahead with their chosen action.
  • Deputies sometimes have to make an application to the COP to seek specific authority for certain actions and it is difficult to predict how long the COP will take to grant the required authority.


  • There is no relevant independent body to supervise how trustees are managing a trust on an ongoing basis. Nonetheless, they can be challenged about any breaches of trust or abuse of office.
  • Deputies are required to submit an annual report to the Office of Public Guardian, which ensures that they continue to make reasonable decisions in the best interests of the incapacitous person.


  • Trustees are only involved in decisions relating to the funds held within the trust and not all of the person’s financial assets.
  • Deputies have general authority to manage all of a person’s property and financial affairs and not only the funds that arise from the compensation award.

If you do not feel confident that you can choose the right option for you or your loved one and need some specialist advice to help you understand the best way forward, please contact us for an initial confidential discussion.

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Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP