How to set up a personal injury trust

Setting up a personal injury trust does not have to be complicated or expensive. I will offer a fixed fee in most cases. I have set out all the points to think about and the information I will need to help you.

The answer to most peoples’ need is a bare trust. This is a simple trust in which money is held for you, and it remains your money. You can change the trustees, and bring the trust to an end whenever you wish.

Personal injury trust Mark Thompson Law

A bare trust is tax neutral which means for tax purposes the money and any income or capital gain is considered to be yours. Any income or capital gain on the trust fund will be treated as your personal taxable income or capital gain and should be included in your tax return. Your personal tax allowances will apply. If that interest remains in the trustee bank account it will have the protection of the trust in respect of benefits you claim.

A trust should have at least two trustees. A friend or family member can act as trustee provided they are at least 18 years of age.

You can be a trustee if your personal injury trust is a bare trust, but there is one very important point to bear in mind: you must have at least two other trustees. The reason for this is that a bare trust is a “device” for holding your own money. If you were ever left as the only trustee your trust ends, and the protection of the trust will be lost. This would only happen if your other trustee died suddenly, the trust ending at the time of that death leaving you no opportunity to add another trustee. I appreciate this may seem unlikely but the third trustee is a very necessary precaution. I appreciate you may have concerns about privacy and convenience but if you are to be a trustee, then at least two other trustees is the best way forward.

We must plan ahead and consider what should happen to the money in the trust if you die. The simplest approach is to include a clause in the trust which transfers the remaining trust fund to your estate so it can be dealt with in accordance with your Will. This strikes me as most sensible as having separate provisions in your trust and Will may frustrate your ultimate wishes. The alternative is to appoint a beneficiary or beneficiaries so the trust fund will pass to them in the event of your death.Help with personal injury trust Mark Thompson Law 03330 223 1708

You are not bound to follow my suggestion. If you want the trust to contain a clause which deals with distribution of any funds in the event of your death please tell me what you have in mind.

I have to be mindful of the regulations which apply to money laundering. These regulations are the reason you are asked to prove your identity when undertaking a financial transaction. Please therefore send me your driving licence or passport, and a domestic bill or bank statement which names you. You can send them as email attachments or by post.

Once the trust is complete you will set up a separate bank or building society account to hold the funds. Do not contact banks before the trust is complete. That account must hold only the compensation from the personal injury action and any income received on that money. The account can be a deposit account rather than a current account if you wish, but do make sure access to the funds is convenient. I suggest you set up the trust first and then approach banks and building societies. The account ought to require signatures of all trustees, and the account should have the same name as the trust itself. The bank may shorten the name on a cheque book which is fine provided the account itself has the same name as the trust. You are not limited to a single account as the trust will contain powers which allow you to open other accounts and investments, or own property. The protection of the trust will cover these investments provided the trust owns the investment,

The best approach is to set up the bank account to receive the compensation cheque, as that will make an audit trail of the compensation money easy to follow. If you have already received your compensation payment that can be transferred to the trust bank account, but you will have to retain statements and documents which confirm the money came from a personal injury compensation case.

Please note you should disclose the existence of the trust to the agency which deals with the assessment of your means-tested benefit. They should be told you have received compensation and you have set up a trust. You do not need to provide any more detail than that although questions may be asked and additional detail sought. I prefer to give notice to your benefit agencies.

The money in the trust can be used pretty much as you wish. There used to be rules that the trust money could not be used to pay for items for which State benefits were intended. Most of these rules have now been brought to an end, but as rules can always change ans benefit agencies come under increasing budgetary pressure, I recommend you keep a record of all transactions under the trust. One thing I would strongly advise you to avoid is paying a regular amount from the trust bank account to a personal bank account. Paying yourself “wages” to cover the necessities of life can clash with some agencies interpretation of the rules. Getting into an argument with a benefit agency is to be avoided, as they stop the benefit and leave it to you to prove they are wrong.  This may all  appear artificial as you may not always be in receipt of benefits, but as it could prove necessary in the future to show how the trust fund was used you should keep your records from the start.

When you use funds from the trust you should not transfer money to your personal bank account or withdraw cash, as by doing this you will lose the protection of the trust and the transferred money or cash will become subject to benefits means-testing. This is the case even if the money is only held briefly. The trust bank account should be used to directly purchase items.

A list of everything I will need to prepare a trust for your compensation is set out below:

  1. The date of your accident, or a description of your injury and the period if it occurred over time.
  2. Your full name and address.
  3. Your national insurance number.
  4. Your date of birth.
  5. Copy documents to confirm your identity – passport OR driving licence, AND a utility bill or bank statement.
  6. Do you wish to be a trustee?
  7. Please provide the full name/s and address of the person or persons to act as trustee/s.
  8. To confirm the identity of the trustees please provide passport or driving licence AND a utility bill or bank account statement.
  9. Should any trust fund remaining at your death be dealt with under your Will? If not, what are your wishes?
  10. The amount you received as compensation. I need the gross settlement or Judgment figure as well as the actual amount you are to receive.
  11. Have you received any interim payments, and if so when were payments received and the amount?
  12. Have you received a final settlement and if so when was the money received and where is it held?
  13.  Documents such as a Court Order or letters or emails from your solicitor to confirm the personal injury claim, the date of the injury, and the amount of compensation.

 

 

About Mark Thompson

Personal injury and accident specialist solicitor
This entry was posted in Personal injury trust. Bookmark the permalink.

26 Responses to How to set up a personal injury trust

  1. Ashleigh says:

    Me and my partner made a claim together for esa, but they have now stopped our money because my partner has 16k in premium bonds and that’s off a payout off an accident he had. What will happen now with housing benefits and council tax? Will I have to pay as it’s in my name? And what can he do to claim a benefit again or can I claim? Could he move some of his money or will they want to no where it’s gone

    • Mark Thompson says:

      You have completed an application for ESA and not disclosed that £16,000 is held in Premium Bonds. Your benefit will be stopped and the first thought will be to prosecute you.
      The facility to put the compensation in a trust is there for you, so if it is held in Premium Bonds and it is more than 52 weeks since the first compensation was paid, the money is no longer compensation really; it is part of your capital and savings.
      You can politely suggest to the DWP that if the compensation was held in trust it would be ignored. They, of course, might ask why did you not put it in a trust.
      A trust can be set up now, but it will not protect the compensation for the period when it was not held in trust. You may also find by the time you have repaid the overpaid benefits you have very little less. Subject to how much money is left and being able to show the Premium Bonds were bought with compensation, a trust could be set up now and that would protect the compensation going forward.
      I have heard DWP staff say a trust must be set up within 52 weeks of first receipt of compensation. You can set up a trust any time you like, but it can only protect personal injury compensation from the date of the trust. If you are on benefits it is vital to set up a trust within 52 weeks of first receipt of compensation, but a trust can be set up later.

  2. Joanne says:

    My father has advanced dementia. He does not receive any means tested benefit but may need nursing care in the future. He is due to receive a personal injury claim payout of £250,000. I have POA. I would like to use some of the money to have an a downstairs bedroom and shower room built on my house so that he can come to live with me. Would I be able to do this and then put the rest of the money in a personal injury trust?

    • Mark Thompson says:

      I assume you have a Enduring Power of Attorney (EPA). This device allows an individual, called the donor, to appoint one or more attorneys to make property and financial affairs decisions, which the donor lacks the capacity to make.
      The starting point is the EPA. Are there any limitations on your powers?
      An Attorney must work in the best interests of the person who appointed them. I appreciate that making additions to your own home may be entirely in the best interests of your father, but as you are improving your own property you ought to contact the Office of The Public Guardian, which oversees EPAs, to seek their guidance.
      By all means set up a trust for the compensation as it will mean the compensation is not taken into account when assessing your father’s entitlement to means-tested benefits and local authority care.

  3. martie s says:

    hello i recieved 8k personal injury compensation and am in receipt of income support,housing benefit & child tax credit, do i need to set up a personal injury trust to stop my benefits from getting withdrew as over 6k savings limit, i was looking to pay debts of £2500 when i recieved compensation,which would bring me below limit, will i still need to keep remainder in a trust to safeguard these. thank you

    • Mark Thompson says:

      You must look at the finances of those you claim with, not just yourself. If your joint funds are below £6,000 you will receive full benefits.
      I think a benefit agency will accept repayment of a genuine business debt as being reasonable. I would contrast this to a debt owed to a family member which could not be proved. Benefit agencies which also accept necessary work on your home, that is repairs and maintenance rather than improvement.
      So you repay the debt and you have £6,000. Holding exactly that sum is too close to the line as there will be times when you slip above the line, for example when you receive benefit payments. It might be more convenient to hold the compensation in trust so you are not totting up your funds every time a payment is received. A trust will also allow you freedom to spend the trust money. Spending money when on benefits is always subject to assessment from the benefit agencies which ask if the expenditure was reasonable for someone who receives benefits. If not considered reasonable you will be treated as still having that money. Such expenditure from a fund is none of their business.

  4. Alex Singer says:

    Thank you so very much Mark for taking the time and making the effort to help explain all of the potential pitfalls; and for highlighting the best steps forward for me a litigant in person who is in the process of setting up a Personal Injury Trust Fund bare trust bank account into which I plan to pay the damages that have been awarded to me. It is very rare to encounter a friendly and helpful lawyer but in this instance I most certainly have. I recommend you, your company and services wholeheartedly and without reservation.

  5. John carter says:

    I am 61 on DLA and Income Support and associated benefits. I have just received £80,000 personal injury payment. Solicitor advised taking out this Trust but her recommended company wanted silly money to sort it out. I have put cheque into a savings account at Barclays till I decide what is required. I know I have a year and require to purchase a few items to make my life easier to get around. I don’t really know additional two people well enough to be trustees and wouldn’t want anyone else controlling my money. What options or needs do I require?

    • Mark Thompson says:

      There are financial advisers who understand trusts but I suspect what has put you off is the ongoing fees. To make best use of £80,000 good financial advice will be a good thing and that advice could be one-off rather than ongoing. Such an adviser or a solicitor may provide professional trustees but the time clock runs every time they have to touch the matter.
      The answer for you may be to act as a trustee yourself along with two family members or friends. As you appreciate being a trustee yourself is not always a good idea, but in your case it may give you “control” in that you can hold the cheque book and receive bank statements and so on. There is no alternative to a trust to protect your benefit position so I think you must find those trustees.

  6. Joe says:

    Hi there I have been awarded 12.000 pounds it is not a massive amount, but I would like to use some of the money to pay an overdrawn bank account it would be 5 thousand then that would leave me 7 thousand, but I need to pay it fairly quick because the interest I am having to pay each month is a fair amount and I don’t get paid that well. Really my question is can I set up a trust fund even after using some of the money to pay back what I owe I am hoping to recieve the cheque in the next few days

    • Mark Thompson says:

      You can set up a trust quickly. All I need is the information set out on this page and the document can be prepared for you. It usually takes a bank or building society ten days to set up the account and provide you with a cheque book and cards.
      Ideally you should set up the trust, open a separate bank account, pay the compensation into that account and then pay off the overdraft. If you feel you cannot wait you can take advantage of the 52 weeks disregard and pay the compensation into your own account, and then later pay the balance into a trust. Provided the compensation can be traced in audit trail style you will not have a problem. I suggest setting up the trust quickly, as although you will have the 52 week disregard period, as time goes on it will be increasingly difficult to identify the compensation.

  7. Keri says:

    Hi I’ve just been awarded just over 8 and a half thousand pounds I receive child tax credit and my husband who is self employed receives working tax do u think we need to protect this amount I no this isn’t a big amount but was wondering if it was worth the worry if we now have to live from it and I really had this amount spent on home improvements that are long over due but don’t no were we stands on this amount cause I no it’s not a big amount be read that 6 thousands the cut off point what would u advise ? Thanks

    • Mark Thompson says:

      The receipt of child tax credit and working tax credit depends on your income and not on your savings/capital. If compensation produces income that income must be declared, and the income should be ignored if it comes from compensation held in a trust. More details can be found at http://www.markthompsonlaw.com/personal-injury-trusts-and-working-tax-credits/personal-injury-trust-to-protect-personal-injury-compensation/
      So if a claim for a means-tested benefit is not likely in the foreseeable future, and you do not intend to hang onto the money, you can proceed without a trust. If you are going to hold on to the money, then a trust may make sense, even though the money is not significant. Six thousand pounds held in the family claiming will stop some benefits, and start to reduce others. It can be difficult to manage your family finances to ensure your benefit entitlement, and by taking compensation out of the equation by setting up a trust, you can overcome that problem.
      If you spend some or all of the compensation you can avoid the management problem I describe, but spending the money quickly, and then claiming a means-tested benefit, sometimes means you are faced with the accusation you have spent the money in order to claims benefits. Dissipating your assets is the phrase used by the benefits agencies.
      So if you are not claiming means tested benefits today, and you spend some or all of the compensation on something like home improvements, you do not need a trust. However, if you had to claim means-tested benefits in the near future, spending the money through a trust would avoid the dissipation argument.
      Every case is different, but you can see that a reliable crystal ball would be very useful.

  8. Saleha says:

    Do santander do trust fund accounts or what should I ask for

  9. christine says:

    Are trustees to a personal injury trust account credit checked. my daughter has to open one of these accounts and would like her brother to be a trustee, he has ccjs. Would this be a problem

    Thanks
    Christine

    • Mark Thompson says:

      The answer depends on the policy of the bank or building society. As a trustee I think the bank would check his identity but I doubt they will undertake a credit check.
      The more likely complication is that creditors might try to argue the money in the trustee account belongs to the creditor. Of course it does not but they might get involved in an argument. For this reason, and it is only on grounds of convenience I would suggest looking for a different trustee.
      If the compensated person is to be a trustee I recommend there be two other trustees. this is explained at http://www.markthompsonlaw.com/how-to-set-up-a-personal-injury-trust/personal-injury-trust-to-protect-personal-injury-compensation/

    • Keith says:

      I have a chq for compensation for 170k and don’t know whether to set up a trust or not. I am not currently on any benefits as I am a student over 18 years old and live in at university. Obviously I don’t know what the future may hold for me after I graduate. Should I bank the cheque and accumulate as much interest as possible as at some stage I will want to purchase a house or will this put me at a disadvantage? Will it effect any benefit I may claim in the future?

      • Mark Thompson says:

        Your question is a good one, and highlights a misunderstanding often held by solicitors about compensation protection trusts. Many compensation solicitors think a trust is only necessary if you are claiming benefits at the time when compensation is paid. You are asking the right question, which is what about the future. You have received a substantial amount of money which indicates you have a level of disability which might mean benefits will have to be claimed in the future. You intend to save the money, and will probably use it to buy property. So why might you need a compensation protection trust?
        Quite rightly you say you do not know what he future holds. Holding that sort of money without a trust would prevent any benefits claim for a long time. Buying a property would take the money off the radar of the benefits agencies, except if care was required, when a property can be taken into account when the local authority undertakes its financial assessment.
        I would suggest you set up a trust and invest the money within the trust. The compensation and the interest you earn is then irrelevant to a benefits means-assessment. Thinking very long term you could buy property through the trust, so that the trust will own the property rather than you personally. That will mean the house is outside a local authority financial assessment should you need care.
        You are right to think ahead, and a trust is the best answer, the only downside being the minor inconvenience of managing the trust fund or its investments separately to your own “personal” money and investments.

        • Keith says:

          Thank you Mark for the advice. Does the money have to be held together in one financial institution? If only £85,000 per institution is covered by the FSCS would I be risking the remaining £85?

          • Mark Thompson says:

            You should have no more than £85,000 in any one financial institution. Take care when you decide what to do as many apparently independent institutions are part of the same organisation. For example the organisations we knew as Abbey and Alliance & Leicester are part of the Santander Group, and the £85,000 applies to all of those organisations as they are one organisation on reality.
            You do not have to keep the trust fund in one account, so open other accounts or investments with other organisations and make sure the trust owns the account or investment. The easiest way to be sure is to have the account with the same name as the trust.

            • Keith says:

              In the future if I want the trust to buy a house and therefore own the property, but there is not enough capital in the trust to cover the whole of the purchase price, would I have to look for a cheaper property or could I add personal money or a obtain a mortgage?

              • Mark Thompson says:

                You will have to check with your bank or building society but I think it unlikely a mortgage would be available to you to make up the difference between the trust fund and the price of the house. A mortgage is an agreement that you will make repayments against the money you owe, and if you fail to pay the mortgagee (lender) will sell the house to recover its loan. Part ownership by a trust might be seen to impeded the ability to repossess the property. Ask and let us know as there may be a sensible way around this.

  10. Roy Smith says:

    What banks do you recomment for Personal injury Trust in the Bristol Area

  11. Cory Koko says:

    Thank you for an extremely informative and easy to understand website.No legal jargon just down to earth advice and practical guidance.i wish all solicitors and lawyers were like you.This is the most helpful site i have come across on this topic.I truly commend you. Very well done and once again thank you!

Leave a Reply

Your email address will not be published. Required fields are marked *

*