Compensation trust - tell me about them

[wainy]

My father in law is due to receive compensation for a hip operation that went wrong (and associated complications)
They are still to finalise everything but their solicitor has mentioned to him to set up a Compensation Trust.

I have googled and read up a bit but have some questions if anyone can shed some light.

A bit of background:
They own their house, have no means tested benefits, and due to pensions etc would not be entitled to other benefits.

If they set up a trust my understanding is:

- If they withdraw any of the money it is tax free
- interest earned on the lump sum is taxed

Some questions are:
- What funds / vehicles can the money be invested in within the trust (can it be stocks / bonds / funds etc?) - they would be looking at low risk
- Does it make sense to put it in a trust based on their position? as they would never be entitled to benefits anyway.


We will need to it down with an IFA once it is all settled but just wanted to broaden my understanding before.

Thanks

[anonymous-user]

Click this link for an explanation, https://www.slatergordon.co.uk/media-centre/blog/2...

Essentially, running a trust can let him keep the personal injury compensation if he needs to claim means-tested state benefits.

Is it worth it? Depends on the amount of compensation. Why? Because the one certainty is the solicitor and small army of advisers involved in running the trust will all want paying .... on an ongoing basis.

What can the trust invest in? Pretty much anything.

[Cudd Wudd]

rockin said:

...Because the one certainty is the solicitor and small army of advisers involved in running the trust will all want paying .... on an ongoing basis.

There is no requirement to have a professional trustee, in which case there shouldn’t be any ongoing costs. There’s usually a one off fee to set it up, and that is usually eventually offset and then exceeded by the continued receipt of means tested benefits. But based on the OP, this would not be of relevance here.

I agree to speak with the solicitor about the benefit(s) of having a Trust. Google “Nestor personal injury trust” and they have lots of useful info on their website. They also can carry out a full benefits review as part of the setting up process (factored into their fee for that service), as often people are unaware of what they may be eligible for, but if the FIL has savings well in excess of £16k, it is unlikely to be worth it.

I have no affiliation with Nestor but I have worked with them in the past and they’ve always been very helpful.