BLOG: Cutting the financial impact of disability
Some injuries can result in permanent disability and a lifetime of care. And even if they are less severe (“non-catastrophic” in euphemistic medical speak), the impact is invariably highly stressful.
There are both emotional and financial costs associated with major trauma – costs faced by both the injured person and by the family members who often will have to care for them – perhaps for a lifetime.
These burdens include loss of earnings if the person is unable to return to work and the potential expense of paying for long-term care. Disability can drastically affect income levels, particularly if the injured person was the major breadwinner of the family.
If one of your loved ones suffers such an injury, one of the first concerns in this case will simply be paying the bills. In the longer term, that person may need therapy, rehabilitation or professional care. If the injury was the fault of another – either as a result of an accident, or through clinical negligence – financial compensation is designed to help with these costs.
These settlements may be made in a lump sum or as successive ‘periodic payments’. But while the headline figures can sound large, making them last a lifetime while paying for medical assistance and/or professional carers is not easy.
In the case of lump sum settlements, the key is to find a low-risk investment strategy that can last, if needed, for a lifetime – and also to maximise your entitlement to benefits.
Personal Injury Trusts, for example, can help ensure that a person who has received a settlement does not automatically lose their benefit rights. A Personal Injury Trust is an arrangement where trustees hold a personal injury award or payout on behalf of the beneficiary (i.e. the injured person). Funds (up to certain limits) held in such a trust do not affect benefits claims.
But it’s not just about the injured person. There are a range of benefits and allowances available to families affected by disability, such as the Carers’ Allowance for people who spend more than 35 hours a week looking after a disabled loved one, or Council Tax and Income Support benefits for families whose incomes have drastically changed.
So if you’re in this situation and a loved one is facing years of care, there are a few key steps to bear in mind. Firstly, you should understand that planning the financial affairs of someone in this position is a specialist task that’s likely to be beyond the capabilities of a generalist IFA or wealth manager.
Secondly, there are things to do before any compensation award is agreed. Check your entitlement to benefits and ensure you’re maximising your potential income. You should also be aware of your ongoing debt position – we often find ourselves talking with banks on a family’s behalf to advise the lender of an injury and ensure there are no problems with mortgage payments and the like.
Finally, post-award it’s about setting up a budget that covers all the potential costs of care and therapy and creating an appropriate investment strategy to match it. Any compensation payment has to last long enough, even a lifetime, and in some cases that might mean higher risk investments to provide a higher level of return.
It’s never easy to deal with a serious injury in the family, but the financial impact is one area where taking the right steps can at least help alleviate some of the stress.
Richard Fraser is managing director of Frenkel Topping, an independent investment adviser specialising in the field of personal injury and clinical negligence awards.