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This is correct. Personal injury damages can be disregarded for a period of 52 weeks from the date awarded. However this is not without complication. Firstly, it is necessary for you to claim the 52 week disregard and it is advisable that this is done in writing to fulfil your obligation to notifying of your change in financial circumstances. Furthermore, the 52 week clock starts ticking from the date of the first payment of any made in consequence of the injury. Therefore previous interim payments, insurance payments or even charitable payments made to you as a consequence of your injury will all start the clock. It is therefore possible that this disregard period will have expired prior to receiving any payment from your personal injury claim. Even if the disregard period is available to you care must be taken. At the end of the disregard period you may be asked to account for how your funds have been used. In the event that your benefits agency considers your expenditure to be extravagant or purposeful to rid yourself of funds to create, maintain or increase any entitlement to you may be caught under the 'deprivation of capital' rules and treated as retaining funds you have spent. This would have the double edged result of reducing your benefit income at a time that you no longer have the capital to support yourself.

There is no special tax status for personal injury awards except periodical payments, which are tax-free income. Depending on your circumstances, you are likely to have personal allowances that allow you to have set amounts of tax-free income and capital gains each year. You may also be eligible to shelter some of your investments from tax by using your ISA allowance each year.

Providing the expenditure you intend to make is acceptable to your benefit agency you may not need to establish a trust. In the event that your benefits agency considers your expenditure to be extravagant or purposeful to rid yourself of funds to create, maintain or increase any entitlement you may be caught under the 'deprivation of capital' rules and treated as retaining funds you have spent. If you are in any doubt as to how your expenditure may be assessed you should seek advice either from an adviser or direct from your benefits agency. Alternatively, by placing your award under the protection of a personal injury trust you will be able to choose how to spend your funds however you wish.

Obviously, that is not the aim, but it happens as part of the normal functioning of markets. A fall in value is not the same as a loss, just as a change in the value of your house is neither a loss nor a profit until you actually sell it. Everyone feels the pain of losses more than the pleasure of gains, and part of our role is to help guide you through the tough times as well as the good ones.

We offer general advice and guidance on personal injury trusts without fee or obligation. We would welcome the opportunity of answering any questions or concerns you may have in relation to personal injury trusts and the protection of means tested benefits. Should you wish to discuss your circumstances and whether a personal injury trust is right for you, please do not hesitate to contact us on 01270 759786.