Is a personal injury trust complicated?

A personal injury trust is no more than an arrangement which holds your compensation separate from your personal funds. Benefits are based on your personal money, the trust keeping the compensation to one side, ignored in the financial assessment for benefits. Once you understand the need for this separation of funds, the arrangement makes sense.

Your benefits are worked out using your personal funds. The compensation is kept separate by the trust and ignored.

Your own money is under your control. You have a debit card and can withdraw cash. The trust account must be operated by at least two trustees, who these days will have internet banking, telephone banking or an app. Not long ago, the trustees had only a cheque book. The need for at least two signatures means no debit card, but with a little organisation and plannng, most purchases can be made.

The trust is not limited to a single current account. The trusts we write can invest in any way in which you can invest personally. The trust must hold the investment, but you have great freedom.

Tax is not complicated. If you have a bare trust, the trust itself is not taxed. If the trust receives income, interest, or makes a capital gain, this is included in your personal tax return. Your personal tax allowances will apply, so if you are not investing a large sum, tax is unlikely.

There is no need to report to benefit agencies, nor explain how and why you have spent money from the trust. The only time a benefit agency will become interested, is if you insist on transferring money to yourself, as cash or by transfer to your personal account. Keep the trust and personal funds separate is the golden rule.

It is important to choose the right trustees. They must be adults (18 years plus), they must be honest and, most important, they should accept the money is yours and work with you. Avoid those who might impose their own views and control the trust. It is your money, so appoint trustees who will help you. If you get it wrong, you can remove trustees and add others, but it is so much better to get the trustee appointment right from the outset.

There is no need for trustees to report to any body or complete a tax return. Their sole responsibility is the compensated person who set up the trust, the trust fund being for that person’s benefit.

At first, the arrangement might feel odd or restrictive. After a couple of transactions, that feeling will wear off.

In summary, a trust will hold your compensation separate from your personal funds. The trust can do very much as you want and, with the right trustees, will not be complicated.

Read why a personal injury trust is a positive thing.

Our guidance on personal injury trusts.

How we can help and the fixed cost.

Instruct us online.

Protect your compensation

Receiving interim or final compensation payment?

You may need a trust to protect benefits and local authority care.

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