I have received compensation – do I need a trust?

First decide if you need a trust. When I write trusts for clients, I deal with the notification of benefit agencies.
Your trust must satisfy banks and benefit agencies. I would say, a trust should be prepared professionally.

You need a trust first, created by a trust deed. Only then do the trustees open a separate bank account for the trust fund.

No. You will not be able to claim benefits to pay rent on a property owned by you or your trust.

I suggest you calculate your maximum monthly funds, then add the £2,500 compensation. If the total is comfortably below the £6,000 you are allowed to hold, you do not need a trust.
Your financial situation has changed, so you should advise the benefit agency of your personal injury compensation.

The various benefit regulations all talk of the compensation payment being held in a trust. In relation to the benefit regulations, a trust is what is required, there being no requirement for a particular type of trust. I write only bare trusts for compensation, as such a trust allows a level of control to the compensated person. You can be a trustee, you can end the trust when you wish and you have the ability to add and replace trustees. This simple form of trust is the answer in 99% of cases.

Means tested benefits stop if you have savings of £16,000 and reduce if you have more than £6,000. You should decide on a trust once you know how much compensation you will receive.

I write trusts for any personal injury compensation you might receive, so one trust will cover both compensation payments.

It is assumed this is the first payment of compensation. It is possible, but only possible, that benefit agencies will accept your planned expenditure is reasonable. If they do, you will not need a trust. You should ask the question and have the reply in writing, as you cannot rely on the answer given by whoever answers the phone at the benefit agency. So do write to the benefit agencies, set out your plans and ask for their agreement there is no need to set up a trust.
Do not spend any money before you have an answer. If you have to set up a trust, make the planned expenditure from the trust.

If you do use compensation to buy part, or all of, a property, there is a good reason to hold the property in a trust. At the moment, ownership of the property in which you live is not a factor when assessing benefit entitlement, but that could change. Ownership of a property is relevant to the financial assessment for care. That assessment would have to ignore a property held by a personal injury trust, so think long term.

You can hold up to £6,000 and still keep your full entitlement to Universal Credit.
To check your benefit entitlement, do visit entitledto.co.uk

The Universal Credit regulations say “where a sum has been awarded to a person, or has been agreed by or behalf of a person, in consequence of a personal injury to that person” it will be ignored if held in a trust.
What you must look at is the reason for compensation. If the compensation is paid for injury, this can be physical, psychiatric, psychological, distress or injury to feelings. Ask your solicitor how your compensation was calculated and the factors which are included. If those factors are included in my list, a trust may be possible.

Your financial position is changed by the receipt of compensation. You should tell benefit agencies. As you can hold £6,000 with no effect on your benefits, your compensation should not change the position.
When your husband receives compensation, that may well take you over the £6,000 line, as you claim as one unit, so a trust for his compensation may well be necessary.

Tax credits are based on your income. The compensation is not income, but if you invest and receive income/interest, that may reduce your tax credits.
Your income has not changed, so I do not think you have to report the compensation.
You should think beyond Tax Credits, as when you are moved to Universal Credit, which is a means tested benefit, your capital will become relevant.

The benefit regulations only allow personal injury compensation to be protected in a trust if the injury is to the benefit claimant. If the compensation relates to the injury to your mother, your father cannot set up a trust to protect his benefit claim.

When you claim benefits, you should declare all the funds you hold. In 2018, you should have declared all funds held by you and those you claim with. That declaration should include compensation. If compensation arrived after 2018, its receipt was a change of financial circumstances, which should have been reported.
You can set up a trust now, but it will not wipe the slate clean.
To be fair to benefit agencies, when they come across someone who could have set up a trust, but did not know of the possibility, they tend to be forgiving when a trust is eventually set up. The only proviso is, if an agency thinks you have been fraudulent, they will not be so forgiving.
I would set up a trust now, particularly if you are to receive compensation for the later accident.

If you received £2,100 and this sum left your total personal funds well below the £6,000 line, you do not need a trust. This is because you remain well below the £6,000 limit.
A benefits agency might say you have not spent the money reasonably, but that will only mean you will be treated as still having the money (called notional capital). Provided your funds remain well below £6,000, this will not matter.