Don't allow a disaster to be a cash crisis

Get what you're entitled to after an accident, say Chiara Cavaglieri and Julian Knight

Think of the worst things that can happen to you and among them will probably be a debilitating accident or perhaps medical negligence.

They are much more common occurrences than you may think. Just ask Sandra Broadbent, 60, who suffered a brain injury and was left paralysed in both legs and one arm after being knocked over on a pedestrian crossing in 2001.

The subsequent court case took two years to conclude, but eventually Sandra was awarded a £3m lump sum based on an expected life span of 14 years.

Sandra's husband, Stuart, 62, who now handles her finances, sold their old home and used the money to buy his wife a specially adapted bungalow in Hazel Grove, Cheshire, so that she could have round-the-clock care.

"Ten years along she has very little memory, but she is able to eat with one hand, she watches TV and she loves doing word searches on the computer," says Stuart, who explains that outgoings for her care are close to £17,500 per month.

The damages are being managed by specialist advice firm Frenkel Topping, and although the pot was hit heavily by the recession which wiped out much of the income Sandra was earning by interest and investments, the firm has managed to stretch it out for another four or five years.

"Sandra will probably outlive her finances," says Stuart. "She does receive some disability benefits, but it doesn't come to much. I should have retired at 56 from the NHS but now my pension pays the mortgage and I have to work to live."

Sandra and Stuart are far from alone in their difficulty and large financial settlements made when someone suffers injury or disability have to be handled properly. Expert independent advice is crucial and ideally should be sought at the earliest possible stage, because securing compensation is not simply about how much, but how it's paid out.

Inez Brown, of law firm Medical Accident Group, says: "Many claimants and their solicitors often delay seeking this advice until a claim has settled, by which time it's too late to amend the settlement terms. The first step in the settlement process is to determine whether the client would benefit from a lump-sum payment or regular payments for the rest of the claimant's life."

In most cases, damages for personal injury and clinical negligence are settled as a lump-sum payment, but this needs to be properly managed.

Richard Fullman, head of personal injury at Investec Wealth & Investment, warns against leaving awards in the Court Funds Office's Special Account (which holds money awarded in court to children and people who are unable to look after their own affairs) as it currently pays just 0.5 per cent interest, falling way short of inflation.

"Leaving large sums of cash on deposit may seem like a risk-free option, but it can have catastrophic consequences for lifetime awards as capital is rapidly haemorrhaged and the returns needed to get the portfolio back on track become unfeasibly high," he says. "The risks of getting it wrong can be devastating and result in parents and carers responsible for managing their dependents' financial affairs facing tough decisions around cutting the costs of medical care and support."

One of the first considerations will be setting up a personal injury trust so that the damages will be disregarded when it comes to assessment for current or future entitlement to means-tested state benefits.

There are different forms of trust and picking the right type will depend on your personal and family circumstances. For example, bare trusts allow you to pass on damages to children, while discretionary trusts offer greater flexibility in terms of inheritance tax.

On average, residential care costs start from £532 a week, while a nursing home is closer to £750 a week. Spending just four years in care could therefore equate to a colossal bill of £156,000.

The Government has promised a complete overhaul of the current care system, introducing deferred payments so that councils cover care bills initially before recouping the money from an individual's estate after their death. There will also be an overall cap on elderly care costs of £72,000 from 2016 (based on the standard fee, which the local authority in the area would pay for the care), but critics say these proposals will only help a few people.

The London School of Economics has warned this offers no protection to the estimated 340,000 elderly people who pay for help in their own home. Furthermore, the cap will not include the "hotel costs" of a care home such as food, energy bills and the accommodation (set at £12,000 a year under the reforms). And people will only be able to defer the care costs if they have assets of less than £23,250 (excluding the value of their home). While the poorest will continue to get free social care, anyone with assets of over £118,000 – this time including the value of property – will have to cover their care home costs until they either reach the £72,000 cap or their assets fall below £118,000.

The welfare system is so complicated that it is easy to see why navigating it without any help leaves many people missing out on entitlements. A specialist lawyer or your adviser should be able to point you in the right direction for any financial support, including attendance allowance, disability living allowance or personal independence payment, carer's allowance and NHS continuing care funding.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete tomorrow
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
News
Kim Jong Un gives field guidance during his inspection of the Korean People's Army (KPA) Naval Unit 167
newsSouth Korean reports suggest rumours of a coup were unfounded
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
music
PROMOTED VIDEO
News
i100
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
News
peopleSwimmer also charged with crossing double land lines and excessive speeding
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
art
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

    Isis an hour away from Baghdad -

    and with no sign of Iraq army being able to make a successful counter-attack
    Turner Prize 2014 is frustratingly timid

    Turner Prize 2014 is frustratingly timid

    The exhibition nods to rich and potentially brilliant ideas, but steps back
    Last chance to see: Half the world’s animals have disappeared over the last 40 years

    Last chance to see...

    The Earth’s animal wildlife population has halved in 40 years
    So here's why teenagers are always grumpy - and it's not what you think

    Truth behind teens' grumpiness

    Early school hours mess with their biological clocks
    Why can no one stop hackers putting celebrities' private photos online?

    Hacked photos: the third wave

    Why can no one stop hackers putting celebrities' private photos online?
    Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

    Homegrown ballerina is on the rise

    Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
    Education, eduction, education? Our growing fascination with what really goes on in school

    Education, education, education

    TV documentaries filmed in classrooms are now a genre in their own right
    It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

    It’s perfectly reasonable to negotiate with villains like Isis

    So why don’t we do it and save some lives?
    This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

    Is a sub-2-hour race now within sight?

    Dennis Kimetto breaks marathon record
    We shall not be moved, say Stratford's single parents fighting eviction

    Inside the E15 'occupation'

    We shall not be moved, say Stratford single parents
    Air strikes alone will fail to stop Isis

    Air strikes alone will fail to stop Isis

    Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
    Witches: A history of misogyny

    Witches: A history of misogyny

    The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
    Shona Rhimes interview: Meet the most powerful woman in US television

    Meet the most powerful woman in US television

    Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
    'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

    Endangered communities photographed 'like Kate Moss'

    Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style