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Trusts
Compare trust services from qualified UK advisors. Protect assets for your family, plan for inheritance tax, and control how your wealth is distributed.
A trust is a legal arrangement where one person (the settlor) transfers assets to another person or group (the trustees) to hold and manage for the benefit of others (the beneficiaries). Trusts are used in the UK for inheritance tax planning, protecting assets for children or vulnerable people, managing wealth across generations, and shielding property from care home fee assessments. The most common types are discretionary trusts, bare trusts, interest in possession trusts, and will trusts.
Setting up a simple trust typically costs £500 to £3,000 depending on complexity and whether a solicitor or specialist trust advisor is involved. Trusts must be registered with HMRC's Trust Registration Service, and certain trusts are subject to periodic charges of up to 6% of the trust value every 10 years. Despite these costs, trusts remain one of the most effective tools for protecting family wealth and managing inheritance tax exposure on estates above the £325,000 nil-rate band.
Sources: HMRC Trust Registration Service, GOV.UK Trusts and taxes guidance, The Law Society
Trusts
1. What are the main types of trusts?
The four main types are discretionary trusts (trustees decide who benefits and when), bare trusts (beneficiary has absolute right to assets at 18), interest in possession trusts (beneficiary receives income but not capital), and will trusts (created within a will and activated after death).
2. How much does it cost to set up a trust?
A simple trust within a will costs £500 to £1,500. A standalone lifetime trust costs £1,000 to £3,000. Complex trusts with multiple beneficiaries or assets can cost £3,000 to £5,000 or more. Ongoing administration adds £300 to £1,000 per year.
3. Are trusts worth it for inheritance tax?
Trusts can reduce inheritance tax but are not always the best option. Lifetime gifts using the seven-year rule and regular gifts from surplus income are often simpler and more tax-efficient. Trusts are most valuable for protecting assets for minors, vulnerable beneficiaries, or blended families.
Each type of trust serves a different purpose. The right one depends on what you want to achieve and who you want to protect.
| Type | How it works | Best for | Tax treatment |
|---|---|---|---|
| Discretionary trust | Trustees have full control over how and when assets are distributed to beneficiaries from a defined group. | Families who want flexibility, protecting assets from divorce or debt, inheritance tax planning. | 20% entry charge on assets over £325,000. Periodic charges up to 6% every 10 years. Income taxed at 45%. |
| Bare trust | Beneficiary has absolute right to trust capital and income. Trustees hold assets as nominees only. | Setting aside money for children or grandchildren. Simple, tax-efficient for small amounts. | Taxed as beneficiary's income. No entry or periodic charges. Beneficiary gains full control at 18. |
| Interest in possession trust | One beneficiary receives income from trust assets during their lifetime. Capital passes to another beneficiary on their death. | Providing for a surviving spouse while preserving capital for children from a previous relationship. | Income taxed at beneficiary's rate. Capital may be subject to inheritance tax on beneficiary's death. |
| Will trust | Created within a will and only takes effect after the settlor's death. Can be discretionary or interest in possession. | Protecting children's inheritance, controlling when beneficiaries receive assets, tax planning. | Depends on trust type chosen. No lifetime entry charge as trust is created on death. |
| Life insurance trust | Life insurance policy held in trust so the payout goes directly to beneficiaries outside the estate. | Ensuring life insurance proceeds avoid inheritance tax and probate delays. | Payout is outside the estate for inheritance tax. Usually free to set up through the insurer. |
Trust costs depend on the type, complexity, and whether you use a solicitor or specialist advisor.
| Service | Typical cost |
|---|---|
| Will trust (within a will) | £500 to £1,500 |
| Standalone discretionary trust | £1,000 to £3,000 |
| Complex trust (multiple assets or beneficiaries) | £3,000 to £5,000+ |
| Life insurance trust | Usually free (arranged through insurer) |
| HMRC Trust Registration | Free (mandatory for most trusts) |
| Annual trust administration | £300 to £1,000 |
| Trust tax return preparation | £200 to £500 per year |
The most cost-effective option for many families is a will trust, which is created as part of your will at a fraction of the cost of a standalone trust. Life insurance trusts are often free to set up and can save your family tens of thousands in inheritance tax on the policy payout.
Putting your house in a trust is a common estate planning consideration, but it has significant drawbacks that are often overlooked.
Trusts are powerful tools but they are not for everyone. The biggest mistake I see is people setting up trusts to avoid inheritance tax when simpler options like lifetime gifting or life insurance in trust would achieve the same result at a fraction of the cost. Always get advice on whether a trust is genuinely the right solution for your situation.
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Trusts
Compare trust services from qualified advisors across the UK. Free, no-obligation quotes.
Trusts
Compare trust services from qualified advisors across the UK.