Personal injury trust

Keep your compensation and benefits with a personal injury trust.

Personal injury trust – special needs trust – compensation protection trust. These are all names used for a trust to protect personal injury compensation.

A personal injury trust means personal injury compensation is ignored when your finances are assessed for benefits and care. This is allowed by the benefit rules. 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. This will affect your entitlement to benefits and local authority support for care. You should 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 if you claim benefits as part of 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. A personal injury trust can protect compensation when local authority care is assessed.

A short-term decision may cost you dear.

The law quite rightly accepts compensation is not a bonus or windfall. Compensation is designed to put right the financial damage, both past and future, caused by an accident or injury. For that reason, it is possible to receive compensation for an injury and still receive state benefits which are means tested. This can legitimately be achieved by paying the compensation into a trust. This is a legitimate arrangement, allowed by the benefit regulations themselves.

These trusts are given a number of names which can confuse. I use the term personal injury trust, but some prefer compensation protection trust or special needs trust. What we are talking about here is a trust set up to hold compensation received in consequence of an injury.

It might sound complicated, but for most cases a simple trust can be drawn up; trustees appointed (one of which can usually be you); a separate bank account opened; and that is it. The most straightforward trust is a bare trust, which I can draw up for you. For large sums, when the compensated person is a child, or if there are mental capacity issues, a more complicated arrangement may be necessary. Not to worry, as I will help you through the process.

Questions and answers about personal injury trusts

Do I Need a Personal Injury Trust?

If you receive a compensation award in respect of a personal injury, your current or future entitlement to certain state benefits and local authority care may be affected. If the amount of compensation will lift you over the financial limits for benefits either now or in the future the answer is simple, you need a personal injury trust. You can only hold a certain amount of capital before means tested benefits are reduced or stopped, so a personal injury trust is the only answer.

When should a Personal Injury Trust be set up?

As soon as possible is the only answer. If you are in receipt of means-tested benefits there is a period of 52 weeks during which the compensation will be ignored, but take care as the 52 week period usually runs from when you first receive compensation, even if it is a small interim payment. A trust can be set up beyond the 52 weeks but leaving things to the last-minute is asking for trouble. My preference is to set up the personal injury trust when you kno wyou are to receive personal injury compensation payment. This applies to an interim payment as well as the final settlement. Having the trust in place to receive all compensation is the best way to avoid problems and prevent means-tested benefits being lost. Learn more about the 52 week period.

Who should I choose to be my Trustees?

A personal injury trust should have at least two trustees. If the simple form of trust is used, you can be one of the trustees, but you should then have at least two other trustees. You must not ever be the only trustee, as the trust will collapse at that point. Your trustees must be persons you trust and may include family, friends, a solicitor or a trust company. It is your decision as to who you want to act as your trustees. They should be people who accept the money is yours and will work with you. A trustee must be at least 18 years of age and have full mental capacity. A trustee should also have a good bank and credit rating or there may be problems opening the trust bank or building society account.

What are the responsibilities of my Trustees?

The trustees hold your personal injury compensation and administer the personal injury trust for your benefit. Although your trustees hold and have control over your compensation award, they cannot use it as their own personal property or for their own benefit. Th etrust fund is not treated as belonging to the trustees for tax or benefit purposes. If you set up a bare trust the money is essentially yours. You can add and replace trustees and bring the trust to an end whenever you want. You do not have to give away control of your money when you set up a bare trust.

What if something happens to my Trustees?

If, for whatever reason, your chosen trustees are unable or unwilling to continue, then the terms of the trust will tell you how a trustee is to be replaced. I recommend you have the power to add and replace a trustee.

Will my chosen Trustees’ Means Tested State Benefits be affected?

No, the trustee holds your award as a trustee and not as an individual, so the trust fund is not counted as part of their capital.

How do I access my Personal Injury Trust Fund?

The trust must hold the compensation. the trustees will set up a separate bank or building society account. You are not limited to one account, so you can have a current and a savings account. Depending on the terms of the trust, property and other investments can be held. The golden rule is that all holdings should be owned by the trust, and not by you personally. The trustees will have banking facilities, a joint account requiring at least two signatures or approvals. These accounts were limited to using cheques, but you will now find internet and telephone banking available. You should pay for items you buy directly from the trust bank account and avoid transferring funds to your personal bank accounts. More help on access to trust funds.

How much can I put into a Personal Injury Trust?

You can put the total value of your personal injury compensation into a personal injury trust. You can add income earned on the money held in trust, or profit made on trust assets. The one trust can hold compensation from more than one personal injury if its terms are drafted widely enough.  Depending on your own circumstances, you may decide to place less than the full value of your compensation into the personal injury trust.

Are there limitations on how the money in the trust is used?

The golden rule is not to use the trust for purposes for which state benefits are paid. This means the trust could not be used for the “normal expenses of daily living.”. I always advise that a record of expenditure should be kept, and the rule of not paying the “normal expenses of daily living” should be followed. One practice to avoid is making a regular transfer from the trust to yourself. Do not pay money across from the trust fund to your personal bank account; spend directly from the trust and you will avoid problems.

What happens if my circumstances change in the future?

If you have used the simplest form of trust, known as a bare trust, the money is yours and you can tell the trustees what to do. If at any time you decide you no longer need the personal injury trust you are usually entitled to bring it to an end. The personal injury trust will then cease, but you may lose your entitlement to any means-tested State benefits/support. If you need a more complicated form of trust you will need detailed advice on this point.

What happens if I die?

If you die, the value of your personal injury trust would be paid to the beneficiaries named in the trust, or it may be paid across to your estate and dealt with under your Will. Using a Will is best, as the Will can be changed but the trust cannot.

Are there any tax implications?

The money held in a bare trust is usually taxed in exactly the same way as if you held the money yourself. This is the case for a simple bare trust. If the possibility of a discretionary trust is raised do make sure you understand the inheritance tax and income tax issues which apply to such a trust. Getting this wrong can be very expensive.

Must a personal injury trust be registered with HMRC?

Not if the trust is a bare trust for personal injury compensation. Most trusts have to be registered with HMRC. This is to preveny money laundering and ensure tax is paid. Quite sensibly, as the source of the compensation payment is known, an exemption has been made for most personal injury trusts.

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Personal injury trust fund to protect means tested benefits

Author: Mark Thompson

Personal injury and accident specialist solicitor

176 thoughts on “Personal injury trust”

  1. Hi Mark, we have a PI bare trust set up for our adult son. He has very little left in it now and would like to close the trust account & transfer the outstanding amount to his own account. Does transferring the remainder effectively close the account & wind up the trust or we as trustees need to take further action to do this? Thanks.

  2. Can you buy a second property with your personal injury trust (main residence also owned by trust) and then rent it out? Can the rental income go straight back into the trust or is it classed as income for benefits purposes?
    Also when the benefits agency asks if you own any property other than your main residence will you have to declare this or is it legally not actually your property at all but instead belonging to the trust? Or is it classed as yours for benefit purposes?
    What about when you want to sell the second home after a few years and its gone up in value, can the whole sale amount be paid back into the trust?

    Thank you

    1. I am often asked what a trust can and cannot do. So often, the answer depends on the powers granted to trustees by a particular trust. Not all trusts are written the same.
      Provided your trustees have the power to purchase such an investment, the trust must hold the property and receive the income. If the property is sold, like any other asset held by the trust, the sale price should be returned to the trust.
      If your trust is a bare trust, then you as the beneficiary of the trust are the tax payer for any trust income or capital gain. Such income or gain is included in your personal tax return and do note, your own personal tax allowances will apply.
      For benefit purposes, the property is an asset of the trust and the trust is ignored for benefit purposes.

  3. Hi there, I have a PI bare trust which allows me to invest in property, the amount is £162000. I was wondering if I/the trustees could set up a Ltd Company in the Trust’s name which would allow for multiple purchases?

    Also, I was told by the bank that my money is only protected to the value of £85000 if the bank crashes etc.. is this true? Are there no exceptions for trusts?

    1. I suggest you speak with the outfit which prepared the trust for you. Not every bare trust is the same, so you will have to check the trustee powers included in your trust.
      I suggest you obtain professional advice if you are thinking of establishing a company.
      You should rely on what you are told by your bank. The trust can hold accounts and investments with more than one bank. Consistently helpful building societies are Skipton Building Society and Bath Building Society.

  4. Hello, My Husband was awarded compensation and was put in a personal Injury Trust, we were told at the time It could be used for property, If we were to sell our Home and move to another property in different area, that costs a bit more, could we add the rest from the trust? and would this effect us if on pip and Income support? and if so, the house would be part cash from sale of our home,and part trust? Thankyou Jayne.

    1. If the trust allows funds to be used for property, the trust can be used to buy, or to contribute to the purchase of, property.
      At the moment, property ownership plays no part in benefit entitlement. I suspect this may change in the future.
      I suggest the trust hold that part of the property for which it has paid. The reason is that the trust offers protection from the financial assessment undertaken for care.

  5. Dear Mark, I’m about to come into a substantial compensation payment. I’m wanting to form a PI trust but use the funds to buy a family home with land and some cottages or caravans to rent out as holiday lets. Myself and my husband would work part time taking bookings and cleaning the rentals between bookings. Would we be able to be paid a income from this then any profits after that go into the trust? I hope that makes sense.

    1. Your plan is quite feasible using a trust for your personal injury compensation, but with one exception. If you personally receive the rent or income from trust assets, or the trust pays a wage to your husband or yourself, that will be taken into account against your benefit entitlement. Please also note, if a benefit agency sees regular transfers from the trust to yourself, they will say this is not a true trust. The trust should buy direct, not transfer funds to you or your husband.

  6. Dear mark,
    After reading few comments i feel more worried. I am settlor and beneficiary and me and wife only two trustees for my PI trust (bare).is this not right? Do we need another trustee?
    Payments i made online bought holidays tickets for my (beneficiary) family

    Online course for myself..
    All with bank debit card (trust one)

    What i normally do keep record on a piece of paper. Payment request amount:… method of payment:…reason for… beneficiary signature trustee1 sign trustee 2 sign

    1. As the compensated person, you should not have personal access to the trust fund. As one of your own two trustees, the trust account should not have debit cards.

      As the compensated person, you can be one of two trustees. I would advise you to have at least two other trustees. If your co-trustee died suddenly, you would be the only trustee. You would be holding your money on trust for your benefit. The arrangement does not look like a trust any more. To avoid this risk, I suggest you appoint at least one other trustee and check the trust bank account requires at least two signatures.

  7. Hello. Will a trustee, who is a parent of the trust fund owner, be entitled to a yearly payment for gratuitous care? Such payments were agreed by both sides at the time of the claim. Would reference to this agreement satisfy the relevant benefit agencies ? Would the fact of being a trustee preclude the parent from receiving such payments? The trust fund owner’s partner is also entitled to gratuitous care payments under the agreement. Could the fund make him such payments? He is not a trustee.

    1. You will have to tell me more.
      Are you saying the settlement is a lump sum, which includes past and future gratuitous care? In the alternative, are you saying an annual payment is to be made by the defendant, or the defendant’s insurer?

  8. I am due to receive a substantial amount of compensation for something that happened to me as a child. I am currently on benefits and would like to buy a small house with some of the money so that have some security in life rather than having to rent. Am I able to do this if I have a trust without if affecting my benefits?

    1. The trust documents I write allow the trust to purchase property.
      If you use compensation to buy a residence for you, benefit agencies will ignore that transaction. The benefit of making the purchase through a trust is to future proof the transaction if benefit rules change and it will protect the property from the financial assessment for care.


    1. A personal injury trust, is a trust which holds personal injury compensation. It is not a type of trust, so I cannot give you a general answer.
      Your own trust will include provisions as to the trustee investment powers.
      A trustee should act in a sensible way, so should differentiate between investment and gambling.

  10. hi am wondering, if you have a personal injury trust fund but owe money to family and friends that can be paid with trust fund? i have no receipts or anything to prove i owe the money and i dont? want to get in trouble

    1. The trust will have been written for your benefit. If you want to repay loans, that is permissible. The vital point is to repay the loans direct from the trust.

  11. Hello Mr Thompson, i’m due to recieve a decent sum of compensation soon and i’m aware it will have to go into a trust fund, im just wondering if im allowed to use some of it to donate to a couple of things? namely an autism charity that have helped me significantly and my local pub thats suffered a bit from lockdown? is it ok for me to chuck them a couple of grand each?

  12. Sorry if the following question has already been asked and answered. I am due to receive monies, circa £12,000. I receive a small amount of benefits £2,340 per year. I work but do not pay tax due to earning under a taxable amount. In 2 years I would not be receiving benefits as I will be able to go back to full time work. If the compensation was to go into my account I would be using £4,680 of my compensation to replace what I get in benefits. If I set up a trust fund, would I have to pay tax on this and if so, what is the tax percentage rate. I’m trying to work out if I would lose more than £4,680 in tax due to the trust fund. Secondly, if the money went straight into my bank account, would I pay tax on it given I do not pay tax currently?

    1. Your compensation is not taxable.
      Tax would only be due if you invested the compensation and made a significant capital gain, or earned enough interest or income to exceed your personal tax allowance.
      Based on the amount of compensation you are to receive, you would pay no tax whatsoever.

  13. Hi Mark, i should be recieving a fairly substantial pay out in the next 2 months or so and was planning in getting in touch with yourself to arrange a trust nearer the time. i was wondering at the moment about paying for things using the trust. so i rarely get out due to my mental health and my PC is a major part of my life, its the only time i really get to interact with my friends, all my entertainment is on etc. unfortunately its nearing the end of its lifespan and when i get my compensation i’d like to use some of it to get my self a high end pc that will last me for many years to come. would i be allowed to use the money in the trust for this? i would argue it comes under maintaining my mental health as it’s integral to my daily life. i had an incident where the power supply stopped working recently for a couple of days and it put me completely out of balance, panic attacks etc.

    1. The trust should not be used for the basics of life, for which benefits are intended. Otherwise, the trust can be used as you wish, but make sure the trust buys the item and avoid transferring funds to yourself. So your planned computer bought by the trust is fine.
      A trust for compensation is a device to hold your compensation separate from your personal funds. You cannot have personal access to the trust fund. The trust fund should make purchases direct and avoid transferring funds to you. Follow these guidelines and you will not go wrong.

      1. thank Mark 🙂 so basically it cannot be used for food,electric,rent,council tax etc. i noticed you said to use a cheque book as well, the overwhelming majority of my shopping is done online (tesco,amazon ebay etc) so i wouldn;t be able to use a chequebook with them. i’m alos in the north of scotland and places that accept cheques here are few and far between. do you get a debit card with the trust fund? i know 2 or more trustees have to approve purchases so maybe theres a card with some kind of 2 factor authentication or something?

        1. To receive means tested benefits and have and use your compensation, you must hold the compensation in a trust. As you already recognise, the trust cannot operate like your own bank account.
          As the compensated person claiming benefits, you must not have personal access to the trust fund. If you have such access, it is not a trust.
          As you may have read, dual authorised online banking is on the rise, but it is not guaranteed to be available.
          So you cannot go shopping online, unless the supplier wil accept a bank transfer or cheque. The use of a credit card, yours or one belonging to someone else, is the answer. Please note, you cannot use a credit card as you wish, knowing it wil be paid by the trustees. That is no different to having personal access to the trust fund. Each transaction must be agreed by the trustees.

          1. ok do you know which banks will allow dual authorization? i will be unable to get a credit card as i’m on disability so they will not approve me and the only people im in face to face contact with are my support workers so there is no way to use some one elses credit card.

            the banks accessible to me are barclays (current account is with them), royal bank of scotland, bank of soctland, hsbc, tsb, santander and clydesdale

            1. At this time, I do not think personal joint current accounts with joint authentication for online banking are generally available. I think the banks are starting to experiment with this system for personal accounts. The system is available for companies, through business accounts, for which the bank will charge a fee. I suspect that is the reason why there is a reluctance to make the facility available to personal customers, as we do not want to pay fees for personal bank accounts.

  14. I am able to work Mark but have the trust to protect the future. The trust can purchase property and can make/ receive loans.
    Your second suggestion of a loan would perhaps be more suitable.
    Can I draw up a document myself to state a loan from the trust to me, (which I will use as the bulk of the house deposit) and then pay the loan back to the trust, as and when I can whilst I continue to work from my own personal funds?
    I hope that would avoid any future problems re the house, should I marry.

    1. I would try to raise a mortgage with the trust holding part of the property title. If not possible, the loan alternative will be the answer. You should set out the agreement in writing and have it signed by you and the trustees.

  15. I am buying a house with some money from my bare pit being used towards the mortgage deposit. I am buying the house for myself, and my girlfriend will move in but will not pay towards the deposit or pay towards the mortgage.
    Am I able to pay the money used, approx 25%, back to the trust if I am able to and choose to in the future?

    1. Property you live in is not a factor for means tested benefits, but it is relevant should you ever need care.
      You should check the terms of your trust. I would be surprised if property cannot be purchased, but do check.
      Ideally, the trust should hold that portion of the property for which it has paid, say 25 per cent. If the property is sold, 25 per cent of the sale price can go back into the trust bank account.
      I am not a property lawyer, but I know from the experience of clients, that mortgage lenders may be troubled by a trust being part-owner of a property. You may have to seek the help of a mortgage broker. If this proves to be a problem, a solution may be for the trust to make you a loan repayable by a percentage of the sale proceeds of the property. That would allow the money to go back to the trust. Again, check if the trustees have the power to make you a loan.

  16. Hi,

    I want to set up a personal injury trust, but I have no parents or family members to call on. So I am having to ask “friends”. I know I can trust them, but I’m hesitant to ask, because I do not know what is involved, and I am afraid to dump a huge responsibility on them.

    With regards to the compensation, I want a trust that will allow me to spend some of it on a property for me to live in, and then about 6 months operating funds put away in a bank for rainy days. After that, I want to give the remainder away via “conditional donation” to a charity so that the charity can use the money while I don’t need it, but I can get the money back if I need it.

    The amount I want to donate via the “conditional donation” arrangement is quite substantial. How can I prove my soundness of mind and protect my trustees from any potential accusation?

    Also, what sort of paperwork will the trustees need to do on a regular basis? I am hoping that the only capital gains would be the value of the property itself. So if I am not buying and selling to make a profit, there will be no capital gains to report. As for the 6 months operating cost hold in cash, there may be a small interest gain, but this should be so small that it will be well within my personal allowance tax limits as I’m disabled and unable to work. Am I correct in understanding there will be minimal accounting work in this setup?


    1. If you set up a bare or simple trust for your compensation, you remain the taxpayer. Your trust would not be registered with HMRC, so the trustees have no responsibility for tax. As you say, your personal tax allowances will apply.
      The trustees must be honest. The trustees should keep records of each investment decision and transaction. It strikes me that you have planned the investment, so your trustees have very little by way of burden.
      I am not familiar with the arrangement you suggest for charitable giving. If you are allowing the charity to earn interest on your capital, why not make the investment yourself and gift the income to the charity?

  17. Hiya, i have just won a claim and i am receiving whip lash compensation of the total amount £2500. I receive working tax credits and child tax credits. Will my benefits be affected still with this amount? Thanks

  18. Hi, someone mentioned a bare trust,(most simple one) what about tax on the trust? and would you have to do any tax forms? thanks,Jane

    1. A bare or simple trust is the most straightforward of the types of trust.
      If you set up a bare trust for personal injury compensation, the trust plays no part in respect of tax. You will be the taxpayer for any income or capital gain on trust assets. Your personal tax allowances will apply.

      1. Thankyou for your reply, If not working (on pip) and have no other income, does that mean the interest on the personal injury trust would be taxable? and if so would it be deducted automatically like with normal bank accounts, or would there be extra forms to fill in? Thankyou, Jane.

  19. I purchased a property in 2014 using my trust fund money for myself, my wife and her 2 children to live in. My parents are trustees on the account, and appear as owners on the deeds for the property.
    Me and my wife have recently seperated, I left the property.
    We were together for 9 years, 6 of those years spent married and living at the property.
    Am I able to tell her to leave the home?

    1. Sorry, this is a matter outside the trust field and outside the expertise of this practice. You need help from a matrimonial speacialist.

  20. My son (22) has received a personal injury initial payment of 50k and is due a second payment of 200k. We have now set up a bare trust with him myself and my husband as trustees. My son lives in uk. We live in france. Barclays say due to brexit we cannot open a bank account as trustees as we have no UK residency. We wonder how we are to control the trust payments and investments (total payout about 500k) if this is fact we cannot open a bank account. Most banks we contacted do not understand our questions. Can you possibly advise us?

    Many thanks. Julie

    1. The trustees should open a joint account for the trust and beyond that, should hold any asset of the trust as trustees. Your must not have personal access to trust funds, so I suggest you set up the account on the basis of two sugnatures. I always advise the bank account be given the same name as the trust, the purpose being that a benefit agency can be satisfied the trust fund is held separately from your son’s personal funds.
      You therefore need a joint bank account, which ideally is given the name of the trust. There is no magic in that, as businesses, clubs and associations open such accounts every day. Introduce the word “trust” and mist seems to descend.
      The banks I recommend on grounds of their consistent results are Barclays and NatWest. I have some good recent reports for Metro Bank and a specialist bank which deals with trusts is Cater Allen.
      Subject to the terms of the trust, could you not open an account in France which could be operated on two signatures?

  21. I’ve got a litigation case ongoing for spinal injuries caused by a surgeon. My case is valued up to £900k. I’m being realistic & I know I could get nothing but if I received £300k I really want to purchase a house. I’ve rented all my life & my housing benefit is only half of my rent so it’s a struggle. I receive ESA & HB. Will I be allowed to buy a home to live in from the trust I set up? What can I actually spend the money held in the trust on?

    Also I may receive a small amount soon of £4-6k for an ambulance running into my car last year. This will take me over the £6k limit by about £2k. What can I do with such a small amount? Can I ask to receive less for ease sake? Or do I have to open a trust?

    Many Thanks.

    1. Compensation in a trust can be used to buy a home. At the moment, home ownership is not a factor when assessing benefit entitlement, but that might change.
      An advantage of holding your property is trust, is it will be ignored in the financial assessment should you ever need care.
      I write trusts to hold all personal injury compensation, so the smaller sum could be paid into the trust.
      You can invest the trust money in any way you could invest personally, the exceptions being ISAs and Premium Bonds, which can only be held by individuals.
      The trust should not pay for items for which benefits are intended, which means the basics of life, but beyond that, you are pretty free to use the trust as you wish.

  22. I have just received a letter telling me I am entitled to a large sum £16500.00 and I wanted to know if there’s away I can keep that with out it stopping my housing benefits from universal credit because then it means all the money may as well get spend paying rent and that’s not really fair I have been awarded the money for over ten years of sexual abuse and I don’t think it’s right I will have to spend it all on rent and things for a council flat is there anyway you can help

    1. The benefit regulations recognise you have received compensation for an injury, rather than a windfall. The regulations allow you to hold and use the money from a trust and keep your benefits. A trust is the only legitimate way to hold and use your compensation and keep your means tested benefits.
      The way i work and my fixed fee is explained here.
      Please call when convenient and we can talk it through.

  23. Thanks, that’s really helpful- does your firm offer legal advice after the trust has been established to the trustees and/or have or recommend specialist financial advisors/ accountants and conveyancing lawyers?

    Thanks again

    1. I often help with the first few transactions and benefit agency enquiries. When setting up the trust, I provide information as to the management of the trust, so overall, I find people manage their own trusts without the need for regular advice.
      I do not offer tax, financial or property advice.

  24. My husband has a bare PIT of which I and 1 other are trustees. My husband and I are on means tested benefits. I am not really clued up on the responsibilities of being a trustee. My husband is investing a large amount of his trust. Will he have to pay tax on the money generated from the investment and who is responsible for tax returns my husband or the trustees. This is worrying me as I don’t understand the responsibilities of being a trustee. Thank you

  25. Hi,
    I’m a bit confused about property purchase and investments. Can a property be purchased by the trust and I live in one flat and rent out the top floor flat, can the income go back into trust ? Or would I then need to dissolve the trust ? I have read on a different site to yours that investments are not encouraged with bare trusts, because the income will still be classed as personal income so I figure there would be no point in having a trust if I make that decision ? Thanks

    1. I will assume you have a bare trust set up to hold personal injury compensation.
      Bare trusts are often used for personal injury compensation. They are easily managed and the person setting up the trust is treated as the taxpayer. The more complicated types of trust are taxed direct. One advantage of a bare trust, is your personal tax allowances apply, so you may find little or no tax is payable.
      I have not seen your trust deed, but it should be able to hold a property and receive rent. The property and rent paid to the trust will be ignored for benefit purposes.

  26. Hi i opened a personel injury trust account for some compension with my now ex partner, we are in the process of a messy break up is there anyway i can access the money without his signiture?? Thank

    1. The answer depends on who are the trustees and how those trustees set up the bank account. Please note, the bank are not bound by the trust deed, they are bound by the arrangements made with the trustees who opened the account.
      I am guessing you and your partner are the only trustees. You should have been advised to set up the trust bank account on the basis of two signatures.
      If you look at your trust, you should have the ability to add trustees. I repeat, the bank are not bound by the trust deed, they are bound by the arrangements made with the trustees who opened the account. The aim is to have your partner cooperate, by retiring as a trustee and signing papers for the bank to be removed as a signatory. That retirement will be dealt with in a supplementary deed which, at the same time, will appoint at least one further trustee. I recommend you add two more trustees.
      You may not feel like it at the moment, but you need to work together.

  27. Hello Mark Thompson,

    My husband has just opened a PI bare trust fund account and waiting to receive a payment of £35,000.00, we are confused what we can or cannot used it for. We are in receipt of means-tested benefit and are worried about been penalised.

    We would like to put forward some questions please if possible :
    – After buying a car with the trust fund, can we pay for the Tax, Insurance, M.O.T and Petrol out of the trust fund?
    – When travelling by car to a holiday destination, can we pay the petrol expenses out of the trust fund and a one off restaurant meal during the holiday period.
    – And is it true we can use the trust fund for an annual TV Licence payment plus an outstanding bank overdraft of £ 300.

    Thank you for any help and a reply.


    1. Do not use the trust for the basics of life, for which your benefits are intended.
      Expenditure from the trust should be direct, with any payment not passing through personal bank accounts.
      Follow these golden rules and you will not go wrong.
      I have not seen the trust deed which created your husband’s trust, but I see no problem with any payment you propose; but follow the golden rules.

    2. Thank you for your reply but still a little confused how to pay for the petrol direct from the trust fund with a cheque book. Can we transfer monies from the trust to a separate bank account to pay for the petrol and an occasional one off restaurant meals while on holiday.
      Thank you very much for any advice.

      1. Cheques seem to be rarely accepted at petrol stations.
        Any money transferred from the trust to yourself, whether it be cash or to a personal account, will no longer be protected by the trust. Any personal expenditure can be assessed as to its reasonableness by a benefit agency. If not considered reasonable, you will be treated as still having the money you spent, this being called notional capital. If you keep spending personally, this notional capital can build to a point where it exceeds the money you are allowed to hold and reduce or stop benefits.
        One answer is to use a credit card and pay the bill with a cheque from the trust. If not possible, you could make a once only transfer to your current account, keeping funds well below £6,000, accepting the money will be treated as notional capital. I say once only to avoid the notional capital figure getting too high. I also say once only, as regular payments from the trust to you will be used to show you have ready access to the trust fund.
        The benefit regulations are quite generous, as you can keep and use your compensation and still receive benefits. You have to respect the trust arrangement and accept the money cannot be used as conveniently as if it were in a personal account.

  28. Thank you for your reply. I think it is a bare trust but will have to check. When you say “holding at least your part in trust makes sense”, what do you mean by this? Half of the house would belong to the trust and the other half belonging to my partner?

    1. The trust can hold part of the property, provided it is the trust which is buying that part. If the purchase is to be made with personal funds, rather than personal injury compensation, then the property could not be held in the trust.
      Mortgage lenders do not seem to like a trust being involved, but I have the impression you are buying without a mortgage.

  29. Hi Mark, I currently have a personal injury trust and I have only ever bought property through the trust which includes my current home and buy to let. I am looking at purchasing a forever home for myself and my partner to live in under both our names using money from the trust (current home will be sold after settling in). My question is, would buying my next house not under the trust class us as first time buyers/buying next home or will I still subjected to the additional 3% stamp duty as a second home? Thanks

    1. If you trust is a bare trust, you are treated as the taxpayer, so you will be buying a second or third home.
      To discover if you have a bare or simple trust, check the trust document to see if you may revoke the trust. It may say revocable. If it does, you have a bare trust.
      I understand the reasons for holding property jointly, but holding at least your part in trust makes sense. The trust held asset is disregarded for benefit purposes and is kept outside a financial assessment for local authority care. Think hard about your plan.

  30. Hi. I was just wondering if you have to have a trust drawn up in order to open a bare trust account or if you can open them without one? Thank you in advance.

    1. A trust is created by a trust deed, a legal document which explains the reason for the trust, appoints trustees and defines the powers of the trustees.
      The trustees then open a bank account to hold the trust fund.
      You cannot just open a bank account and ask benefit agencies to accept it is a trust.
      You can read more here.

  31. Hi Mark Thompson
    Can the personal injury trust purchase property to rent out?
    Will the beneficiary of the trust retain the Right to buy their council property if their personal injury trust has already bought a property?

    Thank you

    1. The trusts I write for personal injury compensation include the power to buy a property. Not all trusts are written the same.
      The right to buy a council house is based on occupation of the property. To protect the discount, the council property must be bought in the name of the purchaser, not the trust. The trust can lend the money for the purchase and the property can be transferred to the trust at the end of the discount period.

  32. my husband has a personal injury trust and we have brought a new house in joint names we also have our previous property which is up for sale with the intention of paying the proceeds of the sale which is also joint straight back into the trust which is a lower amount than we borrowed from the trust , the house cost 99,000 and the proceeds from our old house will be around 60/65.000 will thisaffect our income support

    1. If properly drafted, your trust can hold all sums derived from personal injury compensation. So a loan from the trust can be repaid to the trust. If a trust asset increases in value, the trust can hold that additional value. What you cannot do, is pay into the trust money which is not derived from personal injury compensation. You cannot “top up” the trust from private funds, nor from the sale of an asset which was not bought using the compensation.

    1. Yes. Council Tax Reduction is a means-tested benefit, so compensation for personal injury held in a trust will be ignored.

  33. Hi. One more question, sorry. Myself and my partner are in receipt of JSA and have a joint claim together. Can we both be trustees for a trust in my name? I don’t have anyone else to ask. Thank you.

    1. Yes, provided the trust bank account is operated on the basis of two signatures. You must not have individual access to the trust fund.

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