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

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

  1. Hi Mark, you very kindly assisted me with the setting up of a trustee account two years ago and everything has worked perfectly. Thank you so much for making the whole process so easy and stress free. However, could you please clarify something for me. It says above that…

    “3. The trustees may authorise the use of a credit card. That can be your credit card, or one belonging to someone else”

    Then it states…..

    “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.”

    This has confused me. Does this mean I can or cannot use my credit card to make a purchase and then pay the credit card bill with a cheque from the trust account? A lot of retailers do not like taking cheques. There are items I would like to purchase (ie furniture) that I could pay for with a credit card and then pay the credit card with a cheque. But the wording above has confused me. Apologies if it’s just me reading it wrong but it seems to contradict itself to me

  2. Hi Mark, my wife has received an interim payment and have transferred it into a trust account with Barclays, however we do not fully understand how we can purchase, say a Dyson from John Lewis, directly from the trust account. Does she have to create another current/joint account with Barclays to facilitate the purchase? Thank you for your time.

    1. I presume you have created a trust with a trust deed. I sayhj this, as it is easy to think that opening a bank account is enough.
      Expenditure should be direct from the trust account. There is guidance about trust account use here, but bear in mind, it is guidance for clients for whom I have prepared trusts.

  3. Hi mark
    I’ve just opened a personal injotrydt with Barclays. I was originally rejected by Cater Allen. No idea why.
    I owe people money from the last 6 years after my accident. Can I pay them out of my trust? Also I have been using my credit card and repaying it every month. Now I wish to clear the balance with my compensation money. I don’t intend to use it after it’s cleared. Is this allowed. ?
    There are three trustees on the trust including me. We all have to sign any payment.
    Many thanks
    Jayne.

    1. Such trusts are usually written for your benefit. “benefit” is given a wide definition, so you can us ethe trust for what you want and need.
      Paying off creditors is for your benefit.
      You must not have personal access to the trust fund. Using a credit card knowing the bill will be covered by the trust, is little different from having personal access to the trust fund. I suggest each purchase should be approved in advance by the trustees. You could keep an email record in case you were ever asked to explain your expenditure.

    1. You have fornd the right page to help your trustees set up a new current account.
      I do not know the terms of your trust, but I would be surprised if all funds must be held in a current acccount. Check the ability of the trustees to invest.

  4. I’m in a bit of a pickle and need some urgent advice please. I’m having essential dental work done in Turkey next week. All booked. Can’t afford UK prices.
    Just found out I can’t pay them directly from my trust fund. Can’t withdraw cash from fund, or transfer into my bank to pay them by card.
    Can’t think of any way to pay them that doesn’t break the terms of my joint signatory trust. (ie having personal access to it).
    Morally all is above board. The personal injury trust is for my wellbeing and health costs after a life changing injury. If I break the trust model I will lose my sole disability income and end up destitute.
    I have a day or two to cancel it all.
    I’m so disappointed. Any advice invaluable. M.

    1. I suspect the problem is created by your dental provider.
      Your trust can make a bank transfer. Your trustees may have to go to a branch of your bank if you do not have dual authorised online banking.
      A credit card can be used, not necessarily yours. the trust can pay the credit card bill.
      Someone else could make the payment on your behalf and the trust can repay this loan.
      Whatever solution you use, must be approved in advance by the trustees.

  5. My Injury Trust Account is being closed by my bank . I’m finding it impossible to find another Bank to offer a “Injury Trust Account” !. I need a new kitchen so can I just use the money up and pay for a new kitchen with it ?.

    1. Did you get sorted with a bank for a personal injury trust fund, I am having the same problem, my bank is closing the account and I’m a bit stuck now

      1. You sound like another NatWest trust account holder.
        The answer is to open another bank account for the trust.
        The most consistently helpful banks are Barclays, Metro Bank and Catter Allen. Read all about it here.
        The trust is created by the trust deed. The bank account is simply a place where the trustees hold the trust fund.
        Take a look at the trust deed. I would be surprised if the money has to be held in one account. I write trusts which allow the money to be held in any investment which the compensated person can hold personally. Please note, it is vital the trust holds the investment.

  6. Hello Mark I’m in receipt of contribution based ESA and PIP. I have just been awarded large sum of money. Can the dwp take back any means tested benefits I have had in earlier times. I have heard about The Compensation Recovery Unit . My award is from the CICA. The CICA can’t offer advice. People currently on means tested benefits have advised each other to open injury trust accounts. But I am wondering if I can open a normal account and just put the money in. I did not use a solicitor to claim, I claimed myself.

    1. The Recoupment system does not apply to CICA cases, so you will not be asked to repay benefits already received.
      If you do not receive means tested benefits, you do not need a trust. What you must do is look ahead. If means tested benefits or care are a possibility, then open a trust so the compensation does not prevent an application for such benefits. You can us ethe money in the trust with elative freedom.
      Have a read of this page, which I think will help you.

  7. Hi Mark, i was just wondering what i can do in terms of setting up a trust for compensation I’m expecting (for myself) if i have no one else i can put down as a trustee? For example if you have no family members you can use, no friends/partners close enough, no carers etc

    It feels quite restrictive and contradictory to not have financial independence by having to be codependent on another trustee when the trust is for something so personal like compensation for abuse, yet you wouldn’t be able to access it without the signing of someone else, which you might not have in your life because they are the cause of said abuse/reason you are recieving compensation in the first place. I hope that makes sense. Is this system just very far behind in terms of realising this?

    Thank you for your time and response in advance, much appreciated.

    1. I am afraid you cannot be a sole trustee of a trust for your compensation. At a practical level, benefit agencies will not recognise the trust.
      You can have professional trustees, but expense is involved. I do not offer that service.
      It is not ideal, but the trust can have you and one other trustee. You will set up the bank account for two signatures, so your trustee will not have personal access to the money.

  8. Good afternoon

    I am awaiting a personal injury payment ( no loss of income) to come in. The amount is £19.000
    I am on Universal Credit and I also have just entered an IVA.

    Can i open a personal injury trust and have my sister as a trustee?

    Will i have to pay it into the IVA or can i put it in that trust?

    Another question , i need to have a surgery that costa around £3000 in my home country (romania) and its not covered by NHS. Can I pay that with money from the trust? The surgeons in Romania want cash so not sure how that would work.

    Kind regards
    Maria

    1. On the IVA, whether you have to give notice of the compensation, or make a payment, depends on the terms of your agreement with your creditors.
      You can be one of two trustees, but it is not ideal. You can read more guidance about trustees here.
      You must also consider your credit rating. When opening a bank account for the trust, most banks undertake a credit check. Metro Bank do not credit check for such accounts, as no overdraft facility is included.

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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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