if an individual has a serious injury such that they are awarded a significant compensation payout, is this payout taxable? Secondly, if the funds are transferred into trust with the individuals parents being trustees (and the individual is the settlor and beneficiary), is there a IHT charge for transferring into trust? I would have thought that as the individual was (i) the settlor and (ii) the beneficiary, as they are classed as vulnerable people in receipt of PIP, they would have no IHT to pay if they survive 7 years from date of transfer. If anyone can clarify if my thinking is muddled i would be grateful.
NB the trust deed states the trustees have total control over income and capital and can distribute to the beneficiary as they see fit.
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