What Is a Trust, and Do You Need One?
Keeping Control of Your Assets (Even After You’re Gone)
Let’s talk trusts. No, not the kind of trust where you let someone borrow your lawnmower. We’re talking financial and legal trusts. Trusts can sound intimidating, but think of them simply as a smart, flexible way to protect your assets and manage who gets what (and when). Perhaps most people with very simple estates or lines of inheritance won't need one, but the information here might help you decide if you should look into it further when creating your Will.
What Exactly Is a Trust?
A trust is basically a legal arrangement where you (the settlor) place money, property, or other assets under the management of someone you trust (the trustee) for the benefit of someone else (the beneficiaries). Trusts let you control how and when an inheritance is received, protect children or vulnerable relatives, and can reduce inheritance tax. Most simple estates do not need one, but they are valuable in second marriages and for young or vulnerable beneficiaries.
Put simply:
You decide what's put in the trust.
Your trustees manage it according to your wishes.
Beneficiaries benefit, either now or later.
Why Bother with a Trust?
Good question. Here’s why:
Control: Decide exactly how your assets are used, even after your death.
Protect loved ones: Great for children, grandchildren, or beneficiaries who need guidance managing inheritance.
Minimise inheritance tax (IHT): A trust can help reduce your estate’s potential tax bill.
Speedy transfers: Assets in trusts typically avoid probate, making transfers quicker and easier.
Different Types of Trusts
Trusts come in a few varieties—here’s a clear, UK-friendly guide to the main ones:
Bare Trusts (Simple Trusts)
Beneficiaries immediately entitled to the assets at age 18 (16 in Scotland).
Commonly used for children or grandchildren.
Discretionary Trusts
Trustees have total flexibility over who receives assets, when, and how much.
Useful for complex family situations, vulnerable beneficiaries, or future grandchildren not yet born.
Interest-in-Possession Trusts
One person receives income from the trust (e.g., interest, dividends, rental income) while others get the capital later.
Commonly used for partners or spouses in second marriages.
Family Trusts
Combines features from above, protecting assets within the family from divorce, bankruptcy, or other unexpected problems.
Life Insurance Trusts
If your life insurance is in trust, your chosen trustees will manage the policy and make sure the money goes to whoever you choose as beneficiaries. This could be your children, relatives, friends or even a charity.
When Might You Use a Trust?
Here are practical examples where a trust makes perfect sense:
Protecting kids: You might not want your 18-year-old inheriting a large sum all at once. A trust allows gradual access at appropriate ages.
Second marriages: Ensuring your spouse has financial security, but your children still inherit your assets later.
Reducing tax: Trusts can help minimise your family's inheritance tax bill, leaving more for them (and less for HMRC).
Caring for vulnerable family members: Secure support for beneficiaries unable to manage assets themselves, due to disability or incapacity.
Creating a Trust: How Do You Actually Do It?
It’s surprisingly straightforward:
Step 1: Choose your trustees
Pick trusted, responsible people to handle your trust—often family members, solicitors, or accountants.
Step 2: Decide on your beneficiaries
Clearly identify who will benefit, how, and when. Clarity here saves confusion later.
Step 3: Draw up your trust deed
A trust deed is a legally binding document detailing your wishes. Professional help (solicitor or financial adviser) is highly recommended.
Step 4: Transfer your assets
Place chosen assets (cash, property, investments) into the trust.
Step 5: Register the trust
Most UK trusts must now be registered with HMRC’s Trust Registration Service.
Costs and Considerations
Set-up and management costs: Expect solicitor fees (£500–£1,500 typically), and possibly annual administration fees.
Tax implications: Trusts have their own tax rules (income, capital gains, inheritance tax). Professional advice is essential here.
Is a Trust Right for You?
Trusts aren’t just for the wealthy or overly cautious. They’re practical, versatile tools for anyone wanting certainty and protection for loved ones.
If you're considering creating a trust:
Chat with a professional (solicitor or financial adviser).
Clearly define your goals (tax efficiency, protection, control).
Keep your trust simple—complexity is rarely necessary.
Frequently Asked Questions
Do I need a solicitor to set up a trust?
Not always, some banks and insurers offer free standard trust forms for straightforward purposes like putting life insurance in trust. For anything involving property, complex family circumstances, or a discretionary trust, a solicitor is worth the fee to avoid an error that could undermine the whole arrangement.
Can I change my mind once a trust is set up?
It depends on the type. A discretionary trust can usually be adjusted, since the trustees retain flexibility over who benefits and when, but a bare trust is fixed: once assets are in, the named beneficiary is entitled to them and that generally can't be undone.
What's the difference between a trust and a will?
A will only takes effect after you die and goes through probate first, which can take months. A trust can operate during your lifetime, transfers assets outside your estate, and typically avoids probate entirely, which is why the two are often used together rather than as alternatives.
Will I still have access to assets I've put into a trust?
Generally, no, once assets are in a trust, they belong to the trust, not to you, which is exactly what gives it its tax and probate advantages. If you want to retain access or benefit yourself, you need a specific type of trust designed for that, and it's worth discussing with a solicitor before you transfer anything.
Do trustees get paid for the role?
Family members and friends acting as trustees usually don't charge, though the trust can reimburse reasonable expenses. Professional trustees, such as solicitors or accountants, do charge fees, which is worth factoring in if you're considering appointing one for a larger or more complex trust.
What happens if a trustee dies or can no longer act?
This is exactly why naming replacement trustees when you set up the trust matters. Without one named, the remaining trustees can usually continue, but if none are left able to act, the Court can be asked to appoint a new trustee, which is slower and best avoided by planning ahead.
"Immortality...a fate worse than death."
Edgar A Shoaff
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