Personal injury trusts and how I can help

Personal injury trusts – how I can help

My aim is to help you decide if a personal injury trust is right for you. I deal with most clients by telephone, email and letter and a meeting is rarely necessary. I will:

  • Help you decide if a trust for your compensation is right for you.
  • Agree a fixed fee so you know the cost – £480 including VAT.
  • Gather information and documents.
  • Prepare a trust deed.
  • Guide you through signature and witnessing.
  • Guide you in opening a bank or building society account for the trust.
  • Give notice to the agencies handling your benefits claim.
  • Explain how the trust should operate.

You really have helped us as we had absolutely no idea what we had to do and you have not only made it easy but removed a very very large amount of worry and made us feel better and that things have been dealt with correctly.

I hope you will find me to be flexible as I know you have other calls on your time. I am willing to talk out of office hours and I know many people can only email in the evening or at weekends.

Once I have the information I need I will send you a draft trust within a couple of days. Once agreed I will send the trust document to you by post and once signed you can set up your bank or building society account. I think it best you set up the account locally as the account should be run with only a cheque book and bank transfers if the signatories can visit a local branch.

As the trust is set up I will provide lots of information. Once this process is complete you and your trustees should confidently be able to manage your trust.

To help you decide if a trust is necessary if you do not claim benefits please click here and if you do claim benefits please click here.

For the points you must consider in setting up a trust and the information I will need please click here.

For help without obligation please call 0330 223 1708.

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 case of £480 including VAT.

A personal injury trust is a trust which holds personal injury compensation. Benefit regulations allow personal injury compensation to be ignored, provided the compensation is held separate from your personal funds in a trust. A personal trust is perfectly legitimate.

I have set out all the points you must think about and the information I will need to help you.

The answer to the needs of compensated people in receipt of benefits or care is a bare trust to hold personal injury compensation. This is the simplest form of trust, is easy to manage, has no tax complications and allows the compensated person to retain a level of control. Provided you follow a few simple rules, you can use the trust fund with freedom.

Personal injury trust Mark Thompson Law Continue reading “How to set up a personal injury trust”

A personal injury trust is a positive thing, not a problem

A personal injury trust is a positive way to keep and use your compensation and benefits

A personal injury trust is a positive thing, not a problem.
A trust is created by a legal document, called a deed. Trustees are appointed and hold the trust fund. It is not complicated.
Benefit regulations allow you to keep receiving means tested benefits and hold and use your compensation. What’s not to like?
Use your benefits for the basic expenses, then use your compensation direct from the trust as you wish.
All you have to do is keep the compensation in the trust separate from your own money.
In return for keeping your benefits, this looks fair enough.
There is a lot of nonsense on websites about how to avoid setting up a trust. Using a trust is the only legitimate solution, the other solutions all involve fraud. Your compensation is not private as all compensation paid is notified to the Department of Work and Pensions under the compensation recoupment scheme.
The question I am most asked is, how can the compensation in the trust be used? The trust fund should not be used for the basics for which benefits are intended, beyond which the trust can be spent and/or invested in any way you could do so yourself.
I always advise the trust bank account and investments should be operated on the basis of at least two trustee signatures. That means a cheque book only account, which prompts questions too. Cheques are more useful than you might imagine. There will be purchases which require electronic payment, for which the trustees can authorise the use of a credit card and pay the credit card bill by cheque. That allows the trust to operate in the 21st century.
So, there you are. You have a legitimate way to keep receiving benefits and hold and use your personal injury compensation. The law makers accept a compensated person has not won the lottery, the compensation being paid for injury and financial loss, both past and future, so why should they be penalised. I think it is a generous law, so please don’t mess about with the fraudulent alternatives and take advantage of the generous legitimate route.

I may need a personal injury trust

Do I need a personal injury trust to protect my compensation and benefits

A personal injury trust is the only legitimate way to hold and use compensation and still receive means tested benefits. Such a trust is an opportunity to keep and use your compensation and receive means tested benefits.

The personal injury trust means your compensation will be ignored if you or others in your close family either claim, or need to claim, means tested benefits. The same applies if you require local authority care.

I continue to be surprised by the advice given to people receiving accident compensation about personal injury trusts. The advice presents a personal injury trust as an optional extra. A personal injury trust is vital in many cases and advisable in others.

Image shows trust deed for personal injury trust to protect means tested state benefits

Continue reading “I may need a personal injury trust”

Personal injury trust

You can keep your compensation and still claim means-tested benefits if your compensation is protected by a personal injury trust.

Personal injury trust or special needs trust or compensation protection trust and protection of State means-tested benefits. All names used for a trust to protect personal injury compensation.

A trust will mean personal injury compensation is ignored when your finances are assessed for benefits and care. Here we help you understand protection of compensation with a trust.

When you receive compensation for a personal injury it can take you above the financial limits for means–tested State benefits, and affect your entitlement to local authority support for care. So be aware and look at the benefits you are receiving today, and just as important the benefits you may need in the future. Don’t just look at yourself as benefits are claimed by a family unit.Image shows personal injury trust deed to protect means tested benefits

It is worth repeating that you must also look at your care needs, both now and in the future, as a personal injury trust can protect compensation when local authority care is assessed.

A short-term decision may cost you dear.

Continue reading “Personal injury trust”

Personal injury trust fund

I need a personal injury trust fund.

I am often asked how to set up a personal injury trust fund. The question is asked by people who are settling personal injury compensation claims and are worried they may lose their means tested benefits.

You will be relieved to know you can legitimately keep your benefits and compensation. What you must do is set up a trust to hold the compensation, often called a personal injury trust. The trustees then open a separate bank account, so the compensation is held separate from your personal funds.

A trust is created by a trust deed, a legal document, which states the purpose of the trust and appoints trustees to manage the compensation.

Benefit regulations allow compensation to be held in a trust, it being accepted compensated people have not won the lottery. Compensation has been paid for injury, financial loss and future needs. Provided you keep and use the compensation separate from your personal funds, in a trust, the compensation will be ignored when assessing your finances for benefits or local authority care. This is a generous allowance and should be used by all compensated people who currently claim means tested benefits, or who are likely to claim such benefits in the future. The same applies if you will need local authority care.

To help you decide if you need a trust read more here.

How much a trust will cost and how I can help is explained here.

Pros and cons of setting up a personal injury trust are explained here .

Help on personal injury trust 0330
Call 0330 223 1708 at land line rate

Do not be put off by the terminology. A trust is a device to hold the compensation. You are simply asking trustees to manage the compensation for you. You can be a trustee yourself. A trust for compensation is a positive legitimate arrangement, not a problem. Read more.

For help without obligation please call 0330 223 1708

I have received personal injury compensation and I claim means-tested benefits

Receiving means-tested benefits depends on the money held by you and those included in your claim. The usual barrier to a claim is holding £16,000, but if you hold more than £6,000 your benefit entitlement is reduced.

When you receive a sum of money you must inform your benefits agency which will decide if your entitlement to benefits should change. So if you have received personal injury compensation do you have any options? The factors to bear in mind follow.

When you make a personal injury compensation claim the insurance company receiving your claim must inform the Department of Work and Pensions (“DWP”) of the claim.

If you receive an interim payment or final settlement the insurer must inform the DWP.Help on personal injury trust 0330 223 1708

When you receive an interim payment or final settlement you must tell your benefit agency of the change in your financial circumstances.

Personal injury compensation will be disregarded for a period of 52 weeks, but take care and read on.

Some incorrectly say you can blow the compensation in that 52 week period. You can spend it, but if your benefits claim continues, how you spent the compensation will be scrutinized. If you are shown to have blown the money to allow you to continue claiming benefits you will be penalized. The compensation is not ignored permanently. The 52 week period is there to allow you to sort out your affairs and set up a trust, not blow the money and keep your benefits.

If you open a bank account or receive interest on a bank account the tax authority is informed and that information is fed back to the benefit agencies.

As we move into the Universal Credit system there will be more information shared between the various agencies of the government.

Unless you have a small sum in compensation, or legitimate ways to spend the compensation quickly, your only choice is to set up a personal injury trust. A trust to protect your benefits will give you time to stop and plan and use the compensation for what it was intended.

There is an inconvenience in a trust, as you need trustees and a separate bank account, but weigh this up against the benefit of keeping your benefits and the choice is easy.

52 weeks to create a personal injury trust?

Is there a time limit of 52 weeks for setting up a personal injury trust?

There is no time limit within which a trust to protect compensation must be set up.

The best approach is to set up a trust to protect your compensation as soon as you receive the compensation. Continue reading “52 weeks to create a personal injury trust?”

Best bank or building society account for personal injury trust

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.Bank or building society account wanted for personal injury trust Continue reading “Best bank or building society account for personal injury trust”

Compensation protection trust

Compensation protection trust

Compensation protection trust is one of the names given to a trust designed to ensure that personal injury compensation is not taken into account if you claim means-tested benefits or need local authority support for residential care.

The term compensation trust is just a name given to this type of trust, others being personal injury trust and special needs trust. A special needs trust is something quite different but I include it here as it is often thought to be a trust for protecting compensation.

The regulations which contain the rules for benefit payment contain a list of items which are disregarded, or ignored, when working out your entitlement to benefits. There are two disregards for personal injury compensation and they both refer to personal injury compensation held in a “trust.” Only the word “trust” is used, not personal injury trust and not compensation protection trust. These terms are just names given to trusts so you know what they do, but they are names rather than actual types of trust. The regulations use the following phrase : “Where the funds of a trust are derived from a payment made in consequence of any personal injury…” It does not say personal injury trust or compensation protection trust, it just says trust.Compensation protection trust or personal injury trust

Please do not get bogged down in terminology. You need a trust to hold your compensation to protect it should you need to claim benefits or need financial support from a local authority for your care.

To help you decide if you need a trust and see how I can help please click here.

I am happy to chat without obligation on 01392 314086.

 

I do not claim benefits so do I need a personal injury trust?

I received a call from a lady who had just received a cheque for £20,000 compensation from a personal injury claim. Neither she nor anyone in her family were claiming means-tested benefits; but she intended to save the money for the future. Her compensation solicitors advised a personal injury trust was not necessary. Were they right or wrong?

Wrong is the answer I am afraid.Personal injury or compensation protection trust necessary to plan ahead

The advice was wrong because the circumstances of the family were only looked at over the short term. Continue reading “I do not claim benefits so do I need a personal injury trust?”

Personal injury trust for Northern Ireland

Personal injury trust for those with personal injury compensation in Northern Ireland

Those living in Northern Ireland can set up a trust for personal injury compensation. I can prepare the trust for you. All information on this website applies to those in Northern Ireland and to the UK generally


There are some differences in the law and terminology between Northern Ireland and the UK generally, but this is not a problem. Scotland is more difficult, as not only the law, but the legal language, is different.


If you have received compensation from an accident or injury in Northern Ireland, or now live in Northern Ireland, a personal injury trust can be prepared for you at a fixed fee of £480 including VAT. You can see how I work here.

You will find an explanation of trusts for personal injury compensation and the benefit here.

Please feel free to call 0330 2231708  or 01392 314086 for a chat (both at landline rate)– no cost or obligation.

Personal injury trusts and the cost of long term care

A personal injury trust can be a very good idea even if you are not receiving State means-tested benefits or local authority care. You must consider your situation today,  your situation in the future, and do exactly the same for those you claim benefits with.

A local authority must provide accommodation for vulnerable adults who fall outside the responsibility of the National Health Service. But the local authority can charge for the service if a person’s capital is between £14,250 and the upper capital limit which currently is £23,250.

If you need care and have received compensation for a personal injury, that compensation can be ignored in this capital assessment if it is protected by a personal injury trust. Setting up a personal injury trust is an obvious step if you are already receiving care. A trust can be just as necessary if you do not require care today, but may need it in the future.Personal injury trust help 0330 223 1708 Continue reading “Personal injury trusts and the cost of long term care”

Personal injury trusts and working tax credits

Most means tests for benefits look at your capital and income. Working tax credits is not a means-tested benefit. It is an adjustment to your earnings based on your income alone. So what protection is provided by a personal injury trust?

Help on personal injury trust 0330A personal injury trust does not protect you from tax, it only means the compensation should not be taken into account when assessing means-tested benefits.

If you are receiving another means-tested benefit you are automatically entitled to tax credit at the full rate. If you are only receiving tax credits, and no other means-tested benefit then income would normally be taken into account. But if the income is on an asset held in a personal injury trust and the income is paid into the trust, this income should not reduce working tax credits.

The answer lies in the The Tax Credits (Definition and Calculation of Income) Regulations 2002 . Follow the link and see paragraph 16 which excludes income “under a trust derived from a payment made in consequence of a personal injury…”

So that says if you can receive income from a personal injury trust, it will not be taken into account when calculating your entitlement to working tax credits. Good news for those who rely on working tax credit. There is a helpful note on the HMRC website which confirms this.

What you must do is include income received by a personal injury trust in your tax return. This applies if you have a bare trust, most personal injury trusts are bare trusts. You must also declare the income from the trust when applying for working tax credits, as if you do not the difference between your application and your tax return will be obvious. When declaring the income make sure you tell the Revenue about the trust and point to the Regulation above to explain why the income should not be taken into account.

I am happy to chat without obligation on 0330 223 1708

Pros and cons of setting up a personal injury trust

To help you make your decision, I have set out the pros and cons of setting up a personal injury trust. For this comparison I will deal only with a bare trust.

Pros:

  • Compensation ignored when assessing your entitlement to means-tested benefits.
  • Compensation ignored when assessing your entitlement to local authority funded care.
  • Compensated person can retain a level of control.
  • Compensation can be spent from the trust with few restrictions.

Cons:

  • Compensated person must not have personal access to trust fund.
  • Trust must have a separate bank or building society account.
  • The trust must have at least two trustees.
  • Trust bank account requires signature or approval of at least two trustees.
  • There is a cost in setting up the trust (not as much as you think).

The significant benefit of a trust for personal injury compensation is the compensation and income received into the trust fund are ignored when calculating your entitlement to benefits. There is no legitimate alternative to a trust for personal injury compensation.helping you decide if a personal injury trust is right for you

This is a very generous provision which accepts a payment following injury is not a windfall and is intended to cover an injury, plus past and future losses. To gain this significant benefit you should set up a trust and put up with the slight inflexibility involved in managing the trust fund. It is no more than a nuisance, but compare it to the advantages and the decision is clear.

If you are in receipt of benefits or care, or likely to be in receipt of benefits or care, a personal injury trust should be set up to hold the payment received in consequence of a personal injury.

Happy to have a chat without cost or obligation on 0330 223 1708.

Protect Armed Forces Compensation Scheme payments with a trust

Compensation received under the Armed Forces Compensation Scheme can reduce or stop entitlement to means-tested benefits. The answer is to set up a trust for what is personal injury compensation. Continue reading “Protect Armed Forces Compensation Scheme payments with a trust”

What personal injury payments can be protected by a personal injury trust?

A personal injury trust can protect most payments made in consequence of a personal injury

The regulations which govern entitlement to means-tested benefits tell us what sums are taken into account and which are ignored. Among those ignored are “any payment made to the claimant or the claimant’s partner in consequence of any personal injury to the claimant or, as the case may be, the claimant’s partner.”

The injury can be physical, psychological or psychiatric and need not be caused by a single physical incident.

So a personal injury trust can protect compensation for a personal injury plus many other payments “in consequence” of a personal injury. Here are a few examples, but this list is not complete:

  1. Compensation received from the Criminal Injuries Compensation Authority (CICA) for injuries caused by an assault.
  2. Compensation from the Motor Insurers’ Bureau for injuries caused by an uninsured or untraced motorist.
  3. Compensation for an accident which happened abroad.
  4. Compensation ordered by a criminal Court in respect of an injury you suffered.
  5. An Armed Forces Compensation Scheme award.
  6. Payments from other government compensation schemes.
  7. Charitable or public donations following an injury.
  8. Payments from insurance policies, for example accident or travel insurance.
  9. Payments from a Permanent Health Insurance policy made as you cannot work due to a physical or psychological condition.
  10. Payments from a professional negligence claim paid to compensate for a poorly handled personal injury claim.
  11. Some Employment Tribunal awards.

So you will see it is not just money from a personal injury compensation claim which can be protected by a personal injury trust. As I say the list above is not complete but allows you to see the breadth of protection available to allow you to claim benefits and local authority support for care.

If you are able to add to this list of payments in consequence of any personal injury please leave a comment below.

If you would like a chat without cost or obligation please call 0330 223 1708.

Who must I tell about my personal injury trust?

If you have received compensation for personal injury you must inform the agencies handling your claim for means-tested benefits. Help on personal injury trust 0330It is the change in your financial circumstances which makes notice necessary.

If I prepare a trust for you I will inform the benefit agencies you have received personal injury compensation and I have set up a trust for that compensation.

It seems to be the case that if a solicitor gives notice of a personal injury trust fewer questions are asked. The benefit agencies are entitled to ask questions, but the questions asked recently suggest the agencies are checking to see if the trust has been set up properly and in time. You may be asked to prove you have a separate bank account for the trust and that the compensation has been paid into that account. You may be asked the date of the trust, and the date of the first payment of compensation if you have had interim payments. You have no choice but to cooperate as the agency paying the benefit holds the purse strings.

The benefit agencies are starting to ask how the money in a trust bank account is accessed. If the compensated person is a trustee and can access the money directly there will be a very strong argument you have not got a proper trust.

“Benefits” such as working tax credit are more complicated. The “benefit” is managed by HMRC and your entitlement is based on your taxable income. Setting up a personal injury trust does not immediately change your taxable income. So I do not give notice of the establishment of a personal injury trust to HMRC, but when you next advise them of your taxable income you need to see if income from the trust has changed your entitlement. If there is a change then HMRC should be told of the trust and they should be asked not to take account of the income from the trust. This point is dealt with in greater detail if you click here.

If you have set up a discretionary trust to hold personal injury compensation then notice of the establishment of the trust should be given to HMRC. This is because a discretionary trust is taxed in its own right. A discretionary trust can be useful for personal injury compensation, but great care and advice must be taken to see if a discretionary trust has advantages for you.

Trust deed for personal injury trust for protection when claiming means tested state benefits

Why aren’t there more personal injury trusts?

You can see from the questions I am asked there is a shortage of clear advice about compensation protection trusts, or personal injury trusts as they are better known. The banks and building societies often lack experience of opening accounts for trustees. This tells me that trusts are not being used where they are necessary. Continue reading “Why aren’t there more personal injury trusts?”

A message for solicitors on personal injury trusts

Mark Thompson explains how to properly protect a claimant’s compensation

Your client is currently in receipt of means-tested benefits and is to receive an interim payment of £5,000. What should you advise?

Some might say that £5,000 is below the £6,000 allowed by most means-tested benefit tests, so protecting benefit receipt with a trust is not necessary. If this was your answer, please read on.

The majority of benefit entitlement is based on the Income Support (General) Regulations 1987. The capital to be disregarded is set out in Schedule 10, which has been changed on a regular basis. Paragraph 12A was introduced by Statutory Instrument 2006/2378 (at 5(11)(a) and (b)) which came into effect in October 2006. You do know this regulation, as it introduced what we know as the ’52-week disregard’.

So one reason why capital will be disregarded is:

‘12A – (1) Any payment made to the claimant or the claimant’s partner in consequence of any personal injury to the claimant or, as the case may be, the claimant’s partner.

(2) But sub-paragraph (1):

(a) applies only for the period of 52 weeks beginning with the day on which the claimant first receives any payment in consequence of that personal injury;

(b) does not apply to any subsequent payment made to him in consequence of that injury (whether it is made by the same person or another);

(c) ceases to apply to the payment or any part of the payment from the day on which the claimant no longer possesses it;

(d) does not apply to any payment from a trust where the funds of the trust are derived from a payment made in consequence of any personal injury to the claimant.

(3) For the purposes of sub-paragraph (2)(c), the circumstances in which a claimant no longer possesses a payment or a part of it include where the claimant has used a payment or part of it to purchase an asset.

(4) References in sub-paragraphs (2) and (3) to the claimant are to be construed as including references to his partner (where applicable).’

 

Having digested this, readers may like to take another look at the question posed at the outset. Let’s say the £5,000 interim payment was received in January 2013, no trust was set up, and final settlement was in June 2014. Will a trust established in June 2014 protect the personal injury compensation from the means test? The answer is yes and no. There is no time limit on when a trust can be set up, but a trust set up in June 2014 will not protect the compensation received before the date of the trust.

I write trusts for compensation protection, and once notice is given to a benefit paying agency, it is now common to receive a list of questions. They ask when compensation was first received for this injury. The DWP in particular seem to think a trust must be put in place within 52 weeks. This is not correct, but this misunderstanding can create problems for your client if their benefits are suspended.

You could say the 52-week disregard is generous, as it allows time for your client to sort themselves out. They can receive the compensation, spend what they must, and set up a trust later. It can also allow us as advisers to relax. But on my reading of the rules, the 52-week disregard is a trap. The 52 weeks are there to allow a trust to be set up. The compensation is disregarded, but if it is spent before a trust is set up, the expenditure is analysed against the dissipation of capital rules. In the example above, if your client has blown the £5,000 they may well be treated as still having that amount which means their total funds exceed £6,000 and their benefits have been overpaid.

Points to note

I hope you feel satisfied you are not creating problems in respect of the 52 week disregard. It is also worth mentioning a few other issues that I have come across recently.

Spending compensation within the 52 weeks where no trust is established will not guarantee compensation is ignored. The agencies can look back and say the money was dissipated to allow a benefits claim. The agencies only disregard the compensation for 52 weeks, but it does not become invisible permanently. Simply advising your client to “blow” the money within one year of receipt is not safe advice for you or the client.

A payment made ‘in consequence of any personal injury’ will be disregarded if held in trust. There is no limitation on where and how the payment arrives. I suggest the disregard can include a payment from compensation recovered in a jurisdiction beyond our own, a travel policy, personal accident insurance or maybe medical or ill health retirement cover. Keep an open mind please.

Last but not least is the question you often ask at the end of a case, as you proudly present the compensation cheque to your grateful client. You might ask if your client is receiving benefits at the moment. If the answer is no, do you breathe a sigh of relief and put away your personal injury trust script? What about benefits they or family members might need to claim in the future, and what about the care they may need through a local authority? Quite small amounts of compensation tucked away for a rainy day can mean benefits and care may not be paid or subsidised until the compensation has been spent first.

Protecting your client’s compensation is just as important as claiming it in the first place.

Published initially in the Association of Personal Injury Lawyers PI Focus December 2014 Volume 24/Issue No. 10 and since updated.

Trust bank account use

Trust bank account use

This webpage is for clients of Mark Thompson Law who have been through the process of creating a trust for personal injury compensation.

You will be familiar with some of the text below, but this page will answer most questions and help you and your trustees to set up and operate your trust.

Benefit regulations allow you to keep your benefits and hold and use your compensation. The compensation must be held separately from your personal funds and the device used to achieve this is a trust. Once you understand and accept this need for separation of funds, you will be well on the way to understanding how the trust should operate.

When the trust is finalised, the trustees set up a separate bank account to hold the funds. That account must hold only compensation from the personal injury action and any income received on that money.

The first account for the trust should be a current account. You can then set up other accounts and investments, but these must be held by the trust, not by you.

The trust bank account ought to have the same name as the trust. It will be “The (YOUR FULL NAME) Personal Injury Trust 2021.” Benefit agencies sometimes ask if trust money is held separately, so what better answer than a bank statement showing the name of the trust.

Trustees should agree to a financial transaction, so the starting point is all should sign for each financial transaction. If this makes management of the account inconvenient, the trustees can agree to reduce the requirement to two trustees.

Do not be tempted to allow transactions based on your signature alone. If you have direct access to the trust fund, which includes the use of debit cards and internet banking, the trust will not be accepted by benefit agencies.

At the moment, the most consistently helpful banks are Barclays , Metro Bank (£25,000 minimum initial deposit) and Cater Allen. Other banks can open an account for a trust, but I cannot say any are consistently helpful.

Use of trust fund

The trust is a device which holds your compensation and the golden rules are:

1.       Use your benefits to pay for the basics of life.

2.       Do not use the trust on items for which benefits are intended.

3.       Buy direct from the trust.

3.       Do not transfer money from the trust to your personal account.

4.       Do not withdraw cash from the trust.

Money in the trust can be used pretty much as you wish, provided expenditure is made direct from the trust.

The trust should avoid expenditure on items for which benefits are intended, such as food, ordinary clothing or footwear, household fuel and rent.

I recommend you keep a record of all trust transactions. This may appear artificial, as you may not currently be in receipt of benefits, but as it could prove necessary in the future keep your records from the start.

When you use funds from the trust DO NOT transfer money to your personal bank account or withdraw cash. By doing this, you 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.

Must the trust account only have a cheque book?

If you, as the compensated person, are one of the trustees, the account must be operated on at least two signatures. You must not have personal access to the trust fund. Even where the compensated person is not a trustee, the trust should operate on a minimum of two signatures.

One recent development is dual authorised online banking.

This facility has been offered by Barclays on accounts requiring two signatures. It is internet banking , but with an approval process. The first trustee sets up the transaction using online banking, the second trustee is sent a message and approves the transaction.

If you choose Barclays for the trust account, a cheque book will be provided and trustees can visit a branch to arrange a bank transfer. Do make sure you ask about Dual Authorisation.

Metro Bank will open an account for trustees where the initial deposit is £25,000 or more. The bank will entertain a lower interim payment, if the final settlement is likely to exceed £25,000. The funds can be used by cheque, by telephone banking, at a branch or via email. Metro will provide view only access via online banking, free of charge.

Cater Allen, is part of the Santander group. This bank offers accounts with a cheque book and dual authorised online banking. This facility is so much more flexible than a cheque.

If I cannot use a cheque, is there an option?

If a cheque is not acceptable, or the trustees cannot achieve the best price with a cheque, there are four options.

  1. The signatories of a bank account can go to the bank branch and arrange a bank transfer (check for bank charges).
  2. The signatories of a bank account can go to the bank branch and arrange a bankers’ draft (check for bank charges).
  3. The trustees may authorise the use of a credit card. That can be your credit card, or one belonging to someone else.
  4. Banking for trustees is improving, so investigate dual authorised online banking. Not an immediate solution, but worth checking out for next time.

You must not use a credit card knowing the bill will be paid by the trustees. That is the same as having personal access to the trust. Each transaction should be agreed by the trustees.

A credit card works, as the funds do not pass through your hands or personal bank account.

Can I keep some of the compensation in my personal account?

The answer is, possibly.

The answer depends upon whether you have already received compensation and how much money you, plus those claiming benefits with you, hold in personal accounts.

Means tested benefits allow you to have up to £6,000 and no more than £16,000. Once funds go over £6,000, your benefits are reduced.

It is not enough to look only at the balance of accounts, you must include money already spent. Expenditure from your personal account is assessed against a test of reasonableness for someone receiving benefits. It is not a generous test, so even though you have spent money, you can be treated as still having it. This is called notional capital.

This means, if you have already received an interim payment, you should not pay further compensation to yourself. Depending on how you spent the compensation money, you may well be treated as still having that money.

For someone who has not already received compensation and with personal funds well below £6,000, a once only transfer from the compensation to your current account can be made.

Once only, because regular transfers will provoke a benefit agency to object to the validity of the trust.

How much of the compensation can you transfer to yourself? Including the compensation you plan to transfer, you should stay as far below the £6,000 limit as possible. If you transferred £6,000 to yourself, even once spent, that money is very likely to be treated as notional capital. That would mean you would always be treated as having £6,000 and your total funds would often be over £6,000, which would reduce your benefit entitlement. If you must make such a transfer, take your existing funds into account and stay well below that £6,000 limit.

Think carefully about how you plan to use your compensation. I know it feels good to have money in your account, but do think hard about planned expenditure and buy direct from the trust account.

It is a matter of getting used to your money being held in a separate device. The rules take a little getting used to, but the benefits are obvious. You can keep and use your compensation and still receive means tested benefits.

Feel free to ask questions below.