Hi
My son received compensation for personal injury a few year ago.
We ensured that the costs of any benefits received from the DWP which may have to be repaid were included in the settlement (paid directly by the insurer). The solicitor will ascertain from the DWP whether any charges apply.
The momies received in settlement of the claim have been placed in a dicretionary trust. That means that son has no direct access to the money. two trustees administer the trust on his behalf.
That means that the trust is not taken into account for the purposes of means-tested benefits such as Income Support, Local Housing Allowance, Council Tax Benefits or Student Loans etc.
The important thing is that when the insurers finally settle the claim your DH must not have access to the money at any time - the solictor should draw up a Deed of Trust in advnace of settlement and ensure that the trustees receive the settlement cheque and that they pay it directly into an account set up specifically to hold the trust monies.
Personal injury compensation is not taxable and you don't pay capital gains tax on it either. However if your husband is paid regular amounts from the trust fund by the trustees that could count as income - so avoid that.
I complete the tax self-assessment form for the trust fund each year as I am Princple Trustee, but as tax is already deducted at source by the bank it is a relatively simple thing to do.
Finding out about it all was a bit of a nightmare but the HRMC has a good guide - if you perserve you can understand it.