To create a trust for personal injury compensation you first need a trust deed. This is a legal document which creates the trust and appoints your trustees.
Once your trust document is complete the next step is for the trustees to open a separate bank or building society account to hold your personal injury trust fund. Your trust is created by a deed and the trustees then open a joint current account.
You cannot create a trust just by opening a separate bank account, you need to first create the trust with a deed. People sometimes turn up at a bank with a compensation cheque, but without a deed, and this is why confusion is created. I suggest you waste no time on banks before the trust deed is complete.
I recommend you open an account in a convenient local branch. I will recommend banks to clients on the basis of recent client experience. The trust account should be cheque book only, with at least two signatures required for a financial transaction, so there will be times when you need help at the branch.
The first step is to have a trust document, called a trust deed, prepared for you It is the trust document which creates the trust, not the bank or building society account. There should be no need to ask the bank to get involved in the trust itself. All you want from the bank or building society is the facility of an account.
You need a current account to make a start and, beyond that, you can then open other accounts and investments. Please note, all trust accounts and investments must be held by the trust.
There should be two trustees as a minimum. If the compensated person is to be a trustee there should be at least two other trustees. The bank account should be a joint account and should require joint signatures. The account for a personal injury trust should use the title of the trust. A trust for compensation set up for me in 2020 would be called the Mark Thompson Personal Injury Trust 2020.
In summary, what you need is a joint current account for the trustees, and the account must have the name of the trust. That should not be difficult, as businesses and other organisations have accounts in the name of the organisation rather than the individuals who are to sign the cheques.
It seems that as soon as the words “personal injury trust” or “trust” are used in a bank, the transaction immediately becomes complicated. If you are lucky you will find a member of the bank staff who has dealt with a personal injury trust before, but where that experience is lacking, opening the account can become complicated. Some refer to head office, and some call in the bank’s own trust or legal department. The worst recent experience of a client was to be told off at a well-known building society for trying to hide money from the government. That is just ignorance of the law. Creating a personal injury trust is perfectly legitimate, allowed by benefit regulations which specifically allow trusts to protect compensation from the means-testing for certain State benefits and entitlements.
Please do not be put off, as accounts have been opened by all clients. It is a question of finding someone at the bank or building society with a bit of experience. There are some banks which cannot help you as they seem unable to give an account a name which differs from the signatories. I will direct you to the banks which are most helpful.
I think the best way to approach a bank or building society is:
- Do not ask at the window or counter where staff are dealing with basic transactions.
- Do not contact telephone advice lines as the call handlers are unlikely to be able to help.
- Ask at a branch for an appointment for the trustees to open a joint current account.
- Have a copy of the trust document available.
- Trustees must take identification documents – check the bank website for a list of acceptable documents.
- Explain you want to set up a joint account for the trustees.
- Make sure the account has the same name as the trust.
This approach gets the best results. If you turn up at a bank or building society and say you want to set up a personal injury trust, you may be met with a blank expression. What you actually want is to open a joint current account for the trustees.
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Some banks do promote accounts for trusts, but the number has reduced in the last couple of years. You can find my recommendations here.
I would like to hear from those who have been compensated for accidents and injuries. Please let me know the bank or building society and branch you use, as there are differences between branches, and lets discover which bank or building society has got its act together and understands the needs of those with personal injury trusts.
My second request is for information about banks and building societies which pay a decent rate of interest and allow easy access to the trust money. One bank has tried to persuade me that interest is only to be paid on a trustee account if the balance is more than £50,000.
In the interests of those trying to open accounts please share your experience by commenting below. I look forward to hearing from you.