Aibu to not to risk investing child's compensation money?(10 Posts)
My OH and I can’t agree, and we are looking for some impartial advice from anyone with experience please.
Our child has recently been awarded a very large sum of money via the courts for an injury they received at birth.
Our child will not be able to access this money for 10+ years due to her age so the court can either (a) put it into a special account – which only generates a 0.5% interest or (b) we can set up a Personal Injury Trust so that she can gain a better rate of interest.
We are currently seeking financial advice but was wondering if the good people of MN have any experience with Personal Injury Trusts?
There are costs associated in setting up and administrating the Trust and I just don’t know what to do for the best. I am very risk averse but want to do best by my child.
As I say, we are getting some legal advice but wanted to see if anyone had any experience to help guide us?
Thanks in advance.
You need some good, impartial financial advice. They inflation is going, the money will slowly lose its value over the years. It needs to be earning. My experience of investment has been reasonable, and I'm very risk averse, but my savings have grown slowly but surely over the years. I don't know anything about Personal Injury Trusts - get some good expert advice.
I'm so sorry to hear about your child's injury.
Agree with techno without some sort of investment, the money loses value so by the time your child is an adult it won't be worth as much.
Choose the option that gives you the most flexibility. I'm sorry I don't know about these trusts but if there is an option to buy your child a property to live I'm in the future now, in todays money rather than what houses will cost in 10 years time then do it without question.
Different situation but I have a disabled sibling and my parents could have bought them a house outright back when suitable houses were £100k but didn't and now they're £400k. That £100k hasn't appreciated much in interest but it's the difference between owning outright and having a pretty big mortgage.
Thanks so much for replying - we are investigating all options but it's very overwhelming.
I do think we have to invest in some form as otherwise the amount won't grow much at all.
We've had such a long battle to prove negligence and get her the compensation and I just want to make sure we don't let her down now in our choices.
A personal injury trust isn't just about the interest that can be generated it is also about advantages in relation to benefits and tax so is normally worthwhile.
If the payment is for a child you won't be allowed to invest the money anywhere. If you want to do anything other than use the court account you will need to satisfy the court that the money will be safe and well managed for the benefit of the child.
Your legal advisor will take you through the legal implications of a personal injury trust and refer you to a suitable financial advisor as this is a specialist area.
We really wanted to invest in property but we have been told by our first advisor that this isn't possible - we will look into it further as I think in the long run it would be the best option for her money.
Sorry to hear about your sibling.
I really want to make the money work so my daughter has options when she's 18. It's all so confusing - as the money is so big the first company we spoke to today want to take a percentage of the overall figure per year which works out as £5,000+ but they can't guarantee what interest it'll make. They also take the same percentage even if the money was to depreciate.. so much to take into consideration!
Thanks for taking the time to reply.
That's very frustrating that it is one thing or the other OP and you ultimately don't have any control over how it is invested.
Can you split the fund, ie put some in a safe account but then put some in a fund to see how it goes for a couple of years?
I'd speak to different funds, you might find one that has an approach that you are happy with in terms of risk but still generates a better return than 0.5%.
Maybe they all do but it seems very unfair they get their fee even if the fund depreciates, not exactly much incentive for them to work hard at making you money. Better to have a higher fee which they only get when the fund grows.
Good luck, it's a tough situation, on top of already having to deal with your child's injuries.
I would definitely get further advice. The solicitors who handled the claim should be able to give you information regarding the trust. Personal injury trusts ringfence the money and it means that it cannot be taken into account when it comes to assessing any form of care or benefits. If left outside of a trust then it would mean that whether in the form of cash or property these assets are used in a calculation and you will need to exhaust this before you qualify. Property can be purchased but it would be purchased in the name of that trust and not the name of you as individuals. I am aware of a family who have these trusts and it costs £3,000 per year per trust to administrate but they also earn over 3% interest per year. Their firm of solicitors also had an investment arm to the company and everything was dealt with through the same firm.
Solicitor here. You will have a legal duty to invest (If you are trustees of a PI trust) and to take advice. There are great financial advisors out there who specialise in investing these awards appropriately and dealing with clients exactly like you. Find one of those rather than an ordinary advisor. If the award is big enough you can arrange a "beauty parade" and ask three advisors to pitch to you and pick your favourite. With the right professionals on side you will be fine and doing best by your child . Good luck xxx
I used to work as a Trusts lawyer.
If it is a very large amount then you are better with a Personal Injury Trust. 0.5% is less than inflation. You will need appropriate legal and financial advice, but normally a very large amount would be spread around stock market shares (risky but can go up as well as down), government securities and cash deposits, to try to get the best reward for the least risk. Presumably your child has a lifelong disability; if so you need to be setting things up so that they have enough to live on for the rest of their life.
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