Trust Bank Accounts: Why the Name on the Account Matters More Than You Think

A practical guide to keeping trust money properly separated

Last month, a trustee asked me what seemed like a straightforward question: "Can I just hold the trust money in my personal savings account for now? I'll keep track of what's what."

The honest answer is yes, legally you can. But practically? It can create problems that far outweigh the convenience.

I understand the appeal. Opening a trust bank account requires more paperwork than a personal account, banks can be slow and demanding with documentation, and when you've just taken on trustee responsibilities—often following a bereavement—the last thing you want is another administrative burden.

But having helped trustees manage trust funds for vulnerable beneficiaries, I've seen how keeping money in a properly designated trust account prevents problems that are genuinely difficult to untangle later.

Why Separate Accounts Matter

The core issue isn't legal formality. It's practical clarity.

When trust money sits in your personal account, the bank reports any interest earned under your personal tax reference. As far as HMRC's systems are concerned, it's your money earning your income. The bank has no way of knowing otherwise.

This creates two immediate headaches. First, the interest appears on your tax records, potentially affecting your personal tax position. Second, if you need to explain to HMRC that the money actually belongs to a trust, you'll need meticulous records to prove it.

For vulnerable beneficiary trusts, there's an additional consideration. These trusts can access special tax treatment that taxes income as if it belonged to the beneficiary rather than at the standard 45% trust rate. But claiming this treatment requires clear identification of what's trust income versus personal income. Mixed accounts make this unnecessarily complicated.

The Benefits Question

For personal injury trusts or trusts supporting someone receiving means-tested benefits, there's another factor entirely. Benefit agencies specifically look at whether trust money is kept properly separate from the trustee's personal funds. If you have direct access to trust money through personal debit cards or standard online banking, this can affect how benefits agencies view the arrangement.

This isn't about technical legal definitions—it's about demonstrating that trust money is genuinely held separately for the beneficiary's benefit.

What Makes Opening Trust Accounts Difficult

I won't pretend the process is straightforward. Banks have significantly tightened their requirements, partly due to the Trust Registration Service (TRS) that came into effect from September 2022.

Most UK trusts now need to be registered with HMRC, and banks typically require proof of this registration before opening accounts. The documentation usually includes a certified copy of the trust deed, the TRS confirmation (showing either the UTR for taxable trusts or URN for non-taxable ones), identification for trustees, and sometimes identification for adult beneficiaries.

The banking options have also narrowed. Metro Bank remains one of the few high street banks actively accepting trust current accounts, though they charge a £150 opening fee and a monthly fee if the balance falls below £25,000. Building societies like Bath Building Society offer savings accounts with fewer features. Specialist banks like Cater Allen provide more comprehensive services for larger trusts. Barclays stopped accepting new personal trust accounts some time ago.

The process typically takes several weeks, which feels excessive when you're trying to do the right thing.

The Real Risk of Mixed Finances

I should address the Katherine Hill case that's been widely reported. In that situation, a mother was imprisoned for stealing £50,000 her daughters had inherited. Some coverage suggested the problem started with mixed finances, but that's not quite accurate—the money was actually in a separate Barclays account, just one with easy access.

The case illustrates something different but equally important: being a trustee carries serious legal responsibilities. The court described the breach of trust as among the worst imaginable. Having a separate trust account doesn't prevent fraud, but it does create proper boundaries and accountability.

More commonly, the risks aren't criminal but administrative and financial: tax complications, record-keeping difficulties, and the challenge of proving you've acted properly if anyone questions your management of the trust.

The Practical Bottom Line

Opening a dedicated trust bank account takes more effort than keeping money in your personal account. The paperwork is more demanding, the options are more limited, and the process is slower.

But every trustee I've worked with who has dealt with the complications of mixed finances says the same thing: the administrative hassle of doing it properly from the start is nothing compared to untangling things later.

Your responsibility as trustee is to protect assets for someone who often cannot protect themselves. That protection starts with keeping trust money clearly identifiable as trust money.

The account name matters. It's worth getting right from the beginning.

The Financial Conduct Authority does not regulate Trusts. If you're serving as a trustee and would find it helpful to discuss trust administration with a financial planner, I'm happy to have an informal conversation about your situation.