How to set up and operate a trust bank account

Personal injury trust bank account use

This page is to help you set up and operate a joint current bank account for the trustees of a personal injury trust. It is along similar lines to the information provided to clients of Mark Thompson Law for the creation of a trust for personal injury compensation. If your trust has not been drawn up by this practice, do not assume all of the information applies to you.

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 joint 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 2022.” 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.

As the compensated person, you must 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 personal 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 current account.

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. It could prove necessary in the future, so 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 be 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.

Two recent developments are dual authorised online banking and telephone banking for joint accounts.

Dual authorised online banking is offered by Barclays and Cater Allen 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 for a joint account, at a branch or via email. Metro will provide view only access via online banking.

Cater Allen is part of the Santander group. This bank offers accounts with a cheque book and dual authorised online banking.

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 or telephone banking. These facilities have dragged trustee joint accounts into the 21st century.

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 beforehand 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. Beyond £16,000 your benefits stop.

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.

For more help on trust accounts and operation:

Which bank account is best for a personal injury trust

Can I access my personal injury trust bank account?

Feel free to ask questions below.

Author: Mark Thompson

Personal injury and accident specialist solicitor

14 thoughts on “How to set up and operate a trust bank account”

  1. Will DWP deem a property bought by a PI Trust as an asset, therefore affecting my benefits?

    I would like to buy a small property as an investment, but perhaps DWP only permits property to be bought by a Trust if I am going to live in it – can you clarify this for me?

    1. If you use personal injury compensation to buy a property in which you will live, the benefit rules do not require a trust. However, to protect the property from the local authority financial assessment for care, the property should be held by the trust.
      If the property is in trust and is sold, the trust can receive the sale price.
      If you buy a property to let and receive rent, that property must be in a trust for benefit purposes. Just owning the property will affect benefits, as will the income. Such a property must be in a trust and the trust should receive the rent. If held in trust, the property and rent received will be ignored for benefit purposes.

  2. dear sir Hi Mark i dont yet understand the paper of the trustees in all this who can be trustee to sign any check , if can be wife and daughter ,, if can be buy car to can use for work like minicab ? directly from the trust , how can be that and if effect the benefit ? regards

    1. A trust for injury compensation is created by a trust deed. The trust deed appoints the trustees. A trustee must be at least 18 years of age and can be your wife and daughter.
      The trustees then open a bank account for the trust and keep that money separate from your personal funds. The trustees pay for items direct from the trust bank account, using a cheque or a transfer using online dual authorised banking.

  3. Hi Mark

    Can a beneficiary be one of the trustees, and if I use my credit card can I pay off my credit card with the funds from the Trust,its all very confusing.

    1. I presume you are asking about a trust for personal injury compensation and you are the only beneficiary. If you are setting up a bare trust, you can be a trustee. i strongly advise you have two other trustees acting with you. You must avoid being the sole trustee, as your trust will collapse at that point.
      The trustees can agree that a transaction be made using a credit card. This agreement must be in advance of the payment by credit card. Using your own credit card in the knowledge the bill wil be paid by the trust, is the same as having personal access to the trust fund. Stick to one transaction at a time with trustee agreement in advance. An email exchange between trustees will be a useful record of the agreement.

    1. If your trust allows for unsecured loans to be made, the loan repayment can be made to the trust. You should document the loan arrangement and have it signed by the trustees and the person to whom the loan is being made.

      1. I’m awaiting a personal injury award. But a friend of mine has had a very difficult time trying to find. Bank and the solicitor hasn’t been helpful. She has had to go with metro bank even though there is no branches for miles and miles.
        I really want to have a bank that’s local which seems that only bank I would be left with is Barclay. I have been waiting for almost 4 years as my case is quite complicated. I wish I could change solicitors now because the lack of communication is awful. I can’t believe other banks won’t take pi trusts on.

        1. I think you plan to set up your own trust for personal injury compensation.
          There are three banks which consistently help at the moment. These are Barclays Bank, Metro Bank and Cater Allen (part of Santander group). The need for the bank to be local should not be an issue, as the facilities on these accounts have improved. Barclays and Cater Allen offer dual authorised online banking. Metro offer telephne banking for an account which requires two signatures.
          You are notrestricted to a single joint current account fo rtrustees. There are some helpful building societies reported by clients, these being the Skipton, the Coventry and the Bath building societies.
          I hope that sets your mind at rest.

  4. Hi Mark,

    Please could you advise? I’m in receipt of ESA. I am due to receive a personal injury compensation, which I intend on putting into a trust. I would like to invest some of this money into forex trading, to earn money on my trust account. Will this affect my benefits at all? Thank you for your time.

    1. I write trusts to allow the trustees to invest in any way that you could invest personally. It is vital the investment is held by the trust, not by you personally. If any income or gain is received by the trust, your benefits will not be affected.

  5. hi mark if i wanted to purchase something off the internet, say amazon for example, using the trust, do i get a bank card with the trust? im finding it very confusing as most physical places dont accept cheques these days and there’s no way to use a cheque online. i can’t imagine online stores allowing me to do a bank transfer either plus i dont have a credit card and because i am now unemployed i wouldn’t be approved for one

    The signatories of a bank account can go to the bank branch and arrange a bank transfer (check for bank charges).
    The signatories of a bank account can go to the bank branch and arrange a bankers’ draft (check for bank charges).
    The trustees may authorise the use of a credit card. That can be your credit card, or one belonging to someone else.

    1. To receive means tested benefits and have and use your compensation, you must hold the compensation in a trust and, I am afriad, there are compromises.
      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.

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