Trust Solicitors

Discretionary trusts give trustees flexibility to decide when and how beneficiaries receive income or capital.

This makes them particularly suitable where circumstances may change over time, where beneficiaries are young or vulnerable, or where asset protection and inheritance tax planning are important considerations.

An interest in possession trust gives a beneficiary the right to receive income generated by the trust assets during their lifetime, while preserving the underlying capital for future beneficiaries.

These trusts are commonly used in succession planning and blended family arrangements.

A bare trust is one of the simplest forms of trust.

The beneficiary has an absolute entitlement to the trust assets and is generally treated as the owner for tax purposes.

Bare trusts are often used to hold assets for children until they reach adulthood.

Life interest trusts allow one beneficiary to benefit from trust income or occupy property during their lifetime, with the underlying assets passing to other beneficiaries on their death.

They are frequently used within Wills to balance the needs of a surviving spouse or partner with those of children from previous relationships.

Charitable trusts enable individuals and families to support charitable causes while creating a lasting legacy.

Depending on the structure and circumstances, they may also offer valuable tax advantages.

Pension trusts help manage retirement benefits and provide a framework for protecting pension assets for the benefit of members and their families.

Whether you're establishing a trust for the first time, reviewing an existing arrangement, or considering incorporating trusts into your Will, we'll help you understand your options and recommend the solution that best supports your long-term objectives.

A discretionary trust is a trust where you nominate a range of potential beneficiaries (usually spouses, children, and grandchildren). You will appoint trustees who will manage the trust assets.

Who you appoint as trustees will depend on the circumstances and your reasons for using the trust.
The trustees have complete discretion to pay out income and/or capital from the trust to any of the beneficiaries listed at any time.

No beneficiary has an automatic right to the funds. They cannot demand funds, and not one of the beneficiaries actually owns any of the trust assets.

As no one has an entitlement to the trust assets (unless the trustees decide otherwise), the assets do not belong to any individual beneficiary and are not included in their estate at death.

Similarly, they do not belong to any individual beneficiary if they should get into financial difficulties or get divorced (although assets in trust on divorce may be challenged by a matrimonial court).

Discretionary trusts are used for a variety of reasons, including tax-efficiently passing wealth on to grandchildren and further descendants, and protecting assets and vulnerable beneficiaries.

This sort of trust can be useful for protecting against care fees if an individual leaves assets to a trust rather than to the surviving spouse upon death. If the surviving spouse goes into care, the assets in the trust are not part of the survivor’s estate, and the local authority cannot recover them to help pay care fees.
The trust can last for up to 125 years, allowing wealth to be passed down generations. If leaving assets to children directly will simply add to an already taxable estate, you may leave assets to a trust to pass them on to the grandchildren and further descendants.

Many people use trusts so that a beneficiary benefits from the funds but does not have control over them.

 For example, this may be due to the beneficiary being poor at managing money, having issues with addiction or being susceptible to outside influences.

This sort of trust can also be used for minors or disabled individuals.

A discretionary trust offers flexibility. As the trustees control when funds are used or paid out, they can make decisions based on the circumstances at the time.

Every individual has an inheritance tax (“IHT”) threshold of £325,000 before any inheritance tax is payable on their estate.

There is also no tax to pay on gifts between spouses, and it is possible to use the unused nil-rate band of the first spouse to die, against the second spouse’s estate when they die.

If an amount above the nil rate band is given to a discretionary trust, there are inheritance tax implications.

When a trust holds assets to a value of more than £325,000, there is a charge to tax every ten years at a maximum rate of 6% on the assets in the trust which exceed the inheritance tax threshold at that time.

There is a proportionate charge on capital paid out of the trust between ten-year anniversaries.

If you set up a discretionary trust during your lifetime, rather than in your Will, there will be an immediate IHT charge at 20% on any amount transferred into the trust that exceeds the £ 325,000 threshold.

Assets that benefit from business property relief are not subject to IHT at any time.

Please note that the residence nil rate band will not apply where the property is left to a discretionary trust.

However, it should be possible to distribute the asset from the trust to eligible beneficiaries within 2 years of death.

This should therefore not deter people from leaving assets to a discretionary trust if it is a good option for their circumstances.

You should ensure that your trustees receive proper advice at the time so that the trust assets are managed in the most tax-efficient way.

From 30 October 2024, trusts pay CGT at a rate of 24% on any gains after applying the Annual Exemption. Trusts have an annual exemption equal to half that of an individual, so this equates to £1,500 (or £3,000 for vulnerable person trusts).

Business Asset Disposal Relief may be applicable in certain circumstances.

If the trust is going to receive income, then you need to be aware of the income tax implications. 
For discretionary trusts (and other trusts part of the relevant property tax regime), no income tax is payable if the total income in any given tax year is less than £500.

If the Trust income exceeds that amount, the trust will pay income tax at 45% on most income and 39.35% on dividends. 

Beneficiaries who receive income from the trust, and who pay tax at lower rates (or not at all), can reclaim the difference. In addition, if a beneficiary has an entitlement to trust income (which the trustees can create or revoke) and they receive that income directly, the share of trust income they receive is treated as their own income and taxed accordingly. 

Trustee duties are recorded in legislation or confirmed in case law.

Trustees are responsible for looking after the Trust's assets, and must always act in the best interests of the Trust and act impartially between the Beneficiaries. 

Trustees have fiduciary duties, including duties of confidentiality, a duty of no conflict, and a duty not to profit from their position. In addition to their fiduciary duties, the Trustees owe duties of skill and care. The standard of care depends on whether a Trustee is acting in a professional capacity.

At a minimum, the trustees should review the trust every year to check the trust funds and the needs of the beneficiaries; complete any tax returns and submit them to HMRC; and keep trust accounts.

Any decisions made should be recorded in minutes and as trustees’ resolutions. Formal deeds of appointment may have to be drawn up before payments are made to any beneficiary.

As well as complying with a statutory duty of care, Trustees must comply with the relevant provisions relating to investment in the Trustee Act 2000. The TA 2000 gives Trustees the power to make any investment they could have made if they were absolutely entitled to the Trust's assets, but this general power does not extend to land. Trustees must review investments from time to time to assess their suitability and diversity. Trustees should take financial advice from a suitably qualified person. 

The tax treatment depends on the type of Trust. A bare trust is usually transparent for tax purposes, and the beneficiary is taxed as if they own the assets.

Charitable and offshore trusts have specific rules. Most other trusts will fall within the relevant property trust tax regime.

The trust itself does not incur tax; instead, tax may fall on the Trustees, the person creating the trust, and/or the Beneficiaries. The taxes applicable to Trusts are:

• Inheritance Tax (IHT) - potentially on the creation of the Trust, whenever assets are distributed out of the Trust and every 10 years.
• Capital Gains Tax (CGT) – interacts with IHT, and hold-over relief may apply.
• Income Tax – applies differently to different categories of the Trust.
• Stamp Duty (SDLT or SDRT)
• Value Added Tax (VAT)

Except for charitable trusts, the law has long prevented people from keeping assets in trusts indefinitely. Any trusts created now are subject to a maximum term of 125 years from the date of their creation. A trust may be set to end when a Beneficiary reaches a certain age, or when a certain event occurs, as long as this is within the 125-year period. Older trusts may have different fixed periods, and typically, it would have been 80 years.

In principle, anyone can be a Trustee as long as they are over 18 and have the mental capacity to act.

A Trustee can be the person creating the Trust who wishes to retain control over the trust assets, a Beneficiary (but keep in mind a potential conflict of interest if there are other beneficiaries who are not trustees), a professional person (they will be the most impartial but will charge for acting), any other individual, a company and/or a limited liability partnership.

It is important to choose Trustees carefully and trust that they have the relevant skills to carry out the duties. You should have at least 2 trustees and no more than 4. 

Trustees have to act unanimously so they need to be able to work together.

If you survive 7 years from creating a Trust during your lifetime and do not retain any benefit from the trust, then the assets in the Trust will not form part of your estate for IHT purposes on your death.

A Trust can be a preferable way to give assets away for IHT purposes without giving the assets outright to beneficiaries who may still be minors or vulnerable, as it will allow you to retain control over how the trust assets are dealt with and applied if you also appoint yourself as a Trustee.

Trusts in Wills can also help to mitigate IHT. For example, if you own business assets or agricultural assets, then you could leave these assets in a trust on the first death to maximise the available reliefs and exemptions that will potentially result in an overall IHT saving.  

The trust can also reduce the value of the estate passing to a surviving spouse, which could allow your estate to qualify for other IHT reliefs such as the Residence Nil Rate Band.

Once you’ve chosen the right trust structure, the next question is usually timing and cost.

While every matter is different, setting up a trust typically involves gathering information about your goals and assets, confirming the beneficiaries and trustee arrangements, drafting the trust documents, and then completing any required registrations and administrative steps.

Assets can be sold to or gifted into a trust.  When considering making a gift, ensure you will have sufficient funds available for your own needs after the gift.  If the gift into trust is to reduce the value of your estate for Inheritance Tax purposes, you must not retain any benefit;: otherwise, the trust assets will still form part of your estate.  

Questions you should consider include what is the purpose of the trust; what type of trust will be suitable; are there tax consequences on transferring into trust and what is the position in relation to ongoing tax; who is suitable to administer the trust; is the cost of setting up a trust proportionate to the benefit?
You should consider which assets will be transferred into the trust.

Cash is usually easier than investments or property, which may trigger a transfer for CGT purposes.
Trusts can be a good way of passing down wealth and asset protection, and are often used in conjunction with Family Investment companies, which are set up with a nominal value.

Depending on the type of trust being set up and the assets transferred into it, the main taxes are usually Inheritance Tax, Capital Gains Tax, Income Tax, and Stamp Duty.  If the value of the assets being transferred into a Trust exceeds the available Nil Rate Band (currently £325,000), there may be an immediate Inheritance Tax charge of 20% on the balance over and above the Nil Rate Band.

In many cases, a straightforward trust can be prepared within a few weeks, but the timeline can be longer where there are more complex assets, multiple beneficiaries, or additional tax and legal considerations.

If the trust is being created as part of a Will, the process may also depend on how quickly your Will is finalised and signed. Your solicitor will confirm an estimated timeframe after reviewing your circumstances.

Trust costs vary depending on the type of trust, the complexity of the drafting, and whether there are ongoing steps such as trust administration support or tax advice.

Costs may also be affected by the nature of the assets being transferred (for example, cash versus property) and whether any additional documentation is needed. We’ll provide clear cost guidance upfront so you can understand what’s included before work begins.

If you’re considering trusts in your estate planning, it’s worth speaking to a trust solicitor early so you can plan around both the legal steps and the practical expectations - timeframes, fees, and what happens next.

Trusts can be created without documentation through conduct alone; however, it is best to document the terms of the trust to ensure that there is no ambiguity and to create records for reporting purposes, especially when third parties are involved, for example, HMRC, banks, etc.  

It’s possible to create a trust without a lawyer, but it’s important to understand the risks. In some situations, a trust can be formed informally (for example, where someone’s words or conduct clearly show an intention to create a trust and the trust property is identified).

However, for most people planning their estate, the practical challenge is getting the details right — so the trust works as intended and can be administered properly later.

When you create a trust yourself, common issues include unclear wording, the wrong trust structure for your goals, missing or incomplete trustee arrangements, and failing to consider the tax position (including Inheritance Tax and Capital Gains Tax). These problems can lead to delays, disputes among beneficiaries, or costly corrections.

For that reason, many clients choose to speak to a trust solicitor to ensure the trust documents are drafted correctly, the trustees understand their duties, and the plan is aligned with your wider estate planning and tax planning objectives. If you’re considering a DIY approach, we can also review what you’ve drafted and advise on any gaps before you proceed.

When setting up a trust, you’ll need to decide:

1.   Which assets will be transferred into the trust
2. Who the trustees will be to manage those assets
3. Who the beneficiaries are
4. When and how benefits can be paid 

In the UK, many trusts must also be registered and kept compliant with HMRC requirements. This typically involves submitting the trust’s details to the Trust Registration Service (TRS) and ensuring the information is accurate and up to date as circumstances change.

Your trust solicitor can help you understand whether your trust is in scope, what information must be provided, the key deadlines, and what ongoing reporting or record-keeping is required to stay compliant.

Choosing a trust solicitor is one of the most important steps in getting your trust right, because the quality of the drafting and the ongoing trust administration can affect how well your plan works in practice.

When you’re comparing options, look for a firm that can demonstrate:

• Trust experience across the right type of trust: Ask whether they regularly advise on the specific trust structure you’re considering (for example, discretionary trusts, bare trusts, or life interest trusts).
• Specialist knowledge of trust tax planning: Your solicitor should be able to explain the likely Inheritance Tax (IHT), Capital Gains Tax (CGT), and Income Tax implications, and how those rules apply to your circumstances.
• Ability to draft and implement the trust correctly: The solicitor should prepare the trust documents (including those that include trusts in a Will or set up during your lifetime) and ensure the terms are clear and workable.
• Practical guidance on trustees and administration: Good advice doesn’t stop at signing — your solicitor should explain trustee duties, record-keeping, and what ongoing steps may be required.
• Clear communication and cost transparency: You should receive straightforward explanations, realistic timeframes, and a clear understanding of fees before work begins.
• Relevant professional credentials: Membership of bodies such as STEP (Society of Trust and Estate Practitioners) can be a helpful indicator of specialist competence.

If you want confidence that your trust is set up properly and managed with the right level of expertise, it’s worth speaking to a team that deals with trusts regularly and can support you from planning through to administration.