Compensation Trust

If you receive an award of compensation whether this is the result of a civil claim through the courts or via the Armed Forces Compensation Scheme, you need to consider protecting that award and your right to state benefits.

If your savings, including your compensation, are over £6,000 then your means-tested benefits may be reduced. If they are over £16,000 your benefits may stop altogether. So find out what you can do to stay MoneyFit.

Means-tested benefits

Means tested state benefits include

How compensation trusts help

Compensation trusts are a legitimate and straightforward way of protecting your compensation. Any money held in such a trust will be ring fenced and disregarded for benefit calculations ensuring your entitlement to means-tested benefits and support is not affected.

It doesn’t matter if you are not currently receiving means-tested benefits and support - your circumstances may change in the future by which time it may be too late to set up a trust.

When to set up a trust

The trust must be set up within 52 weeks of you receiving your first payment under the claim for it to be effective in protecting your right to benefits, so, you should consider a trust as soon as possible.

How to set up a trust

You need to contact a solicitor to set up the trust for you and they will prepare a Trust Deed. See the websites for the Law Societies in England & Wales, Scotland and Northern Ireland to find a solicitor, or you can contact The Royal British Legion's solicitors’ referral panel via Hilary Meredith Solicitors Limited.

  • You need to choose two trustees to sign the deed in the presence of an independent witness.
  • You can be one of the trustees.
  • The other person can be a family member as long as they are over the age of 18.
  • If you appoint a professional trustee you will have to pay for their involvement in administering your trust.
  • The witness must also be over 18 but not a family member or anyone mentioned in the deed.

Once you’ve all signed the deed, the solicitors will usually store it for you and send you certified copies.

You then need to open a bank or building society account in the names of the trustees.

The compensation will be paid into the bank account and you will need the trustees’ signatures on a cash withdrawal form or access the money.

Your trustees

Your trustees have to act in your best interests. If you are unhappy with any of them you have the power to remove a trustee and appoint someone else.

Informing the Benefits Office

You will need to let the relevant Benefits Office know that you have set up a trust.

Stay MoneyFit with your money

While you can spend the money on anything you like, it’s a good idea to review your situation and budget. Use our Budget planner to work out your finances. If you need to make changes to your home see Adapting a home and if your spouse or partner needs to care for you, see Becoming a carer.

Need help?

For help and advice about setting up a compensation trust, contact The Royal British Legion, Veterans UK (formerly SPVA) or the White Ensign Association

Content provided by Hilary Meredith Solicitors Limited