It is or is not a personal injury trust on account of its source and the involvement of the injured settlor.
A more accurate and informative alternative description might be compensation protection trust as that alludes to its actual purpose under English law.
(1) Basic advantages The existence of a personal injury trust can enable the injured party to obtain certain means-tested State benefits entitlements and to make the best use of the award under English law but there are also other potential advantages.
That is particularly in the case of older, very young, mentally incapable or other vulnerable persons: (5) Further points of note.
Thus it is essential that they retain an interest as a named beneficiary in the award which they settle to form the trust fund.
The UK taxation anti-avoidance rules prevent tax advantages being given to such settlor interested trusts.
For example, if an award of more than the nil rate band for inheritance tax is placed in a discretionary trust or (since 21 March 2006) an ordinary life interest trust, an inheritance tax charge on the surplus becomes due immediately.