Trusts

Settlors, trustees and beneficiaries need specialist trust law advice to navigate this increasingly complex area. We combine expert academic knowledge of trust law with a practical approach to deliver complex advice in a clear, timely and personable way.
 

Trusts are not always simple, but used in the right way with proper management they can be excellent vehicles to achieve a controlled and flexible transition of wealth. They can be used as part of a long-term tax-planning strategy, but they can also have a multitude of commercial, family and succession benefits.

We advise regularly on the following aspects of trust law

• Creation of trusts
• Distribution of trust assets
• Termination of trusts
• Tax planning and the tax implications of actions
• Specialist trusts such as disabled persons trusts or maintenance fund settlements
• Trustee powers, duties and responsibilities
• Trust tax and administration
• Trust compliance and registration
• Changes of trustee
• Applications to the Court to vary a trust
• Trustee risk management
• Trust disputes

Changes to the taxation rules mean that the creation of most UK trusts in lifetime will have inheritance tax consequences resulting in immediate tax charges. However, there remain opportunities for their creation and we are often called upon to advise on that, as well as the administration and interpretation of existing trusts, and their associated tax issues.

As long-term entities, trusts match well with advisors who take a long-term approach and take the time in getting to know their clients’ lives. This is an approach and ethos that is fundamental to our way of working and is appreciated by our clients. We advise settlors, protectors, trustees, beneficiaries and interested parties of private family and charitable trusts, both in the UK and abroad, frequently as long-term advisors.

As a firm we encounter trusts in almost all our practice areas, which ensures that we can draw on our wide and diverse experience in dealing with the specific challenges faced. 

The private client team provides a trust-advisory service in non-contentious circumstances, and can call on the expertise of the Dispute Resolution and Family teams -who also have trust specialists - where the circumstances are or become contentious.

What is a Trust and how does it work?

A trust is a legal arrangement where one party (the settlor) transfers assets to another party (the trustee) to manage for the benefit of a third party (the beneficiary). Here's how it works in simple terms:

Key Roles in a Trust

• Settlor – The person who sets up the trust and places assets into it
• Trustee – The individual or institution responsible for managing the trust assets according to the trust's rules
• Beneficiary – The person or people who benefit from the trust, either through income, capital, or both

How a Trust Works

• Creation – The settlor creates the trust and outlines its terms in a legal document called a trust deed
• Transfer of Assets – The settlor moves ownership of assets (like property, shares, or money) into the trust
• Management – Trustees manage the assets according to the trust deed and legal responsibilities
• Distribution – Trustees distribute income or capital to beneficiaries based on the trust's terms

 

Why Use a Trust?

Trusts can be a powerful tool for managing and protecting your wealth. Here’s what they can help you do:

• Control how your assets are passed on, especially to younger or vulnerable individuals
• Plan for inheritance tax and improve financial efficiency
• Protect assets from risks like creditors, divorce or complex family situations
• Maintain privacy, as trusts don’t go through public probate like wills do

 

When should you set up a Trust?

There are two main options when actively planning to set up a Trust.

Lifetime Trusts (Inter Vivos Trusts)

• Created while you're alive using a trust deed
• Take effect immediately
• You transfer assets such as property, cash, or shares into the trust
• Trustees manage these assets according to your instructions

Will Trusts (Testamentary Trusts)

• Set up in your Will
• Only come into effect after your death
• Activated during the administration of your estate
• Function similarly to lifetime trusts and are part of your estate planning

 

What Trusts Can Do

• Inheritance Tax Planning – Reduce the taxable value of your estate
• Income Tax Management – Income from trust assets may be taxed differently
• Capital Gains Tax Planning – Trusts can help defer or manage Capital Gains Tax (CGT) liabilities

 

What Trusts Cannot Do

• They don’t remove tax obligations
• They are not ‘loopholes’ – HMRC monitors trusts closely
• They won’t shield assets from tax if used improperly

 

Important: Always seek professional advice. Poorly structured trusts can lead to unexpected tax charges or penalties.

 

Frequently Asked Questions
 

Aren’t trusts just used for tax avoidance?

Not at all. Trusts are used in many scenarios and are widely considered to be the pre-eminent vehicle for long-term asset protection, protecting against common crisis scenarios such as bankruptcy and divorce. They are commonly seen in commercial situations.

 

What types of trusts are there?

• Bare trusts
• Life interest trusts
• Discretionary trusts
• Vulnerable Persons trusts
• Charitable trusts

We frequently advise on all these types of trusts.

 

What do I do if I have a claim in respect of a trust or am a trustee concerned that a claim may be brought against me?

By their nature, disputes over wills, trusts, estates and inheritance often occur at times of emotional vulnerability and distress.  Bringing or defending such claims is especially demanding and can become acrimonious and fraught very quickly.

Seeking expert legal advice at an early stage to help resolve matters can be crucial and potentially avoid litigation and costly court proceedings.

We act for trustees, executors, personal representatives, protectors, beneficiaries, charities and for individuals in a wide range of disputes involving estates, trusts and land.  Click here to read our frequently asked questions about trust disputes.

 

Are Trusts Only for Wealthy Individuals?

No — trusts are not just for the rich. While they are often associated with high-net-worth estate planning, trusts can be incredibly useful for a wide range of people, including families, business owners, and individuals with modest assets.

Why Trusts Can Benefit Anyone
 

• Family Protection – Trusts can help parents and guardians provide financial support for children — especially those who are young, disabled, vulnerable, or simply not yet financially mature. Without proper safeguards, giving unrestricted access to money can sometimes do more harm than good. It may affect a person's motivation, future opportunities, or even wellbeing, particularly if the funds enable risky or unhealthy behaviours. Trusts ensure that funds are used responsibly and not accessed all at once.
• Estate Planning – Even modest estates can benefit from structured inheritance planning. Trusts can help to avoid probate delays and ensure assets are distributed according to your wishes.
• Care Fee Planning – In some cases, trusts may help shield assets from being assessed for long-term care costs. This must be done carefully to avoid breaching deprivation of assets rules.
• Tax Management – Trusts can help manage inheritance tax exposure, even for estates below the threshold. They can also assist with income tax and capital gains tax planning.
• Privacy – Unlike wills, which become public documents after death, trusts are private. This can be important for families who value discretion.

Real-Life Example
 

Imagine a couple with:

• A family home
• Some savings
• Two young children

They might set up a discretionary trust to ensure their children are financially supported if something happens to them. The trust would allow the trustees to manage the assets until the children are old enough to handle them responsibly — without giving them full control at a young age.

 

Can I Put My House, Business or Farm into a Trust?

In principle, “Yes” – any asset can go into a Trust. However, given the possible tax and legal implications, before transferring any asset into Trust – particularly your family home, business, or farm – it is important to seek appropriate advice.

Why Put Your House into a Trust?
 

• Estate Planning – Allows property to pass to beneficiaries without going through probate.
• Asset Protection – May help shield the home from certain claims or care fees.
• Tax Planning – Can assist in managing inheritance tax exposure.

Key Considerations
 

• You might lose control or access to the property depending on the trust type.
• There may be Stamp Duty Land Tax (SDLT), CGT, or Inheritance Tax (IHT) implications — especially if you continue to benefit from the property.
• Legal advice is essential to avoid unintended consequences.

Our View: For most people, placing their home into trust is not beneficial and is generally not recommended. There are exceptions, but careful evaluation is needed.

 

Why Put Your Business or Farm into a Trust?

• Succession Planning: Ensures smooth transition of ownership and control.
• Asset Protection – May help safeguard business and farm assets from personal liabilities or family disputes.
• Family Provision – Can support family members without giving them direct control.

Key Considerations
 

• A clear trust deed is essential to define control, voting rights, and income distribution.
• Tax implications depend on the structure and value of the business or farm.
• Professional advice is crucial to align with business, agricultural and tax laws.

Our view: Trusts can offer significant benefits for business and farm owners. We recommend considering them as part of Lifetime and Will planning.

 

What if I still want to benefit from my House, Business or Farm?

Transferring you home, business or farm into Trust whilst retaining a benefit can give rise to complex legal and tax issue. You must seek advice before proceeding.

General Rule of Thumb: Once assets are placed into a trust, you should expect not to benefit from them again. You should be excluded from using or accessing them.

If you’re unsure whether you can afford to live on your remaining assets, or think you might need access to what you’ve given away, then this type of planning may not be right for you.

Will a Trust Protect My Assets from Care Home Fees?
 

Trusts may help protect assets from care home fees, but they are not foolproof and must be used carefully.

Potential Benefits

• Reduced capital for means testing – assets in trust may be disregarded.
• Life Interest Trusts – protect a share of the home for children while allowing a surviving partner to live there.

Key Risks and Limitations

• Deliberate Deprivation – Trusts set up to avoid care fees may be challenged.
• Loss of Control – Trustees manage the assets, not you.
• Legal and Tax Consequences – Poorly structured trusts can trigger taxes.

Best Practice

• Seek professional advice before setting up a trust.
• Plan early – trusts set up when healthy are less likely to be challenged.
• Use trusts for broader estate planning, not just to avoid care fees.

 

Are Trusts Private or Public?

Private Trusts
 

• These are the most common type, especially for families and individuals.
• They’re set up to benefit specific people, such as children or relatives.
• The details of the trust—like who benefits and how—are kept confidential.
• Trusts must be registered with HMRC if they meet certain criteria, but access to this information is restricted to authorities like HMRC or law enforcement, and only under specific circumstances.

Public Trusts
 

• These are created for charitable or public purposes, such as funding a museum or community space.
• They’re subject to more transparency and oversight.
• The beneficiaries are the general public, not named individuals.

Trust Registration and Disclosure
 

• Trusts that meet certain conditions (like having UK tax obligations) must be registered with HMRC.
• This registry isn’t open to the public—only those with a legitimate reason, such as investigating financial crime, can request access.
• Unlike wills, trust documents are not public records. Even if a property is held in trust, the public record will only show basic details, not the full terms of the trust.

Summary
 

Trusts offer a high level of privacy, making them a preferred choice for people who want to manage their estate discreetly. Unless there’s a legal or criminal investigation, the details of a private trust remain confidential.

What are the Costs of Setting Up a Trust?

The cost of setting up a trust can vary widely depending on individual circumstances. Some trusts are simple and inexpensive to create and administer, while others—especially those involving complex property or family arrangements—require more detailed planning and ongoing management.

What Affects the Cost?
 

• The complexity of the trust (e.g. number of beneficiaries, types of assets)
• The type of trust (e.g. discretionary, life interest, bare trust)
• Whether additional services are needed, such as IHT planning
• Any legal work required to transfer assets (e.g. property deeds)
• Opening a trust bank account, which can be time-consuming and may involve extra fees

Ongoing Costs to Consider
 

• Trustee fees, if the trustee charges for their services
• Annual accounting and tax returns for the trust
• Legal updates or amendments to the trust deed
• Documents for distributions to beneficiaries
• Tax advice on trustee decisions (e.g. IHT, CGT, income tax, SDLT)
• Reporting for key tax dates, such as 10-year anniversary charges
• Professional advice for trustees and attendance at meetings

A Word on Costs
 

While the list of potential costs may seem long, many trusts involve only minimal ongoing expenses. It’s important to get a clear picture of the likely costs before deciding whether a Trust is right for you.

Why instruct the private client team at Kingsley Napley for your succession planning needs?

Trusts are among the most versatile and powerful tools available for managing your financial future.

Whether you're aiming to protect loved ones, preserve family wealth, plan for business succession, or navigate complex tax landscapes, trusts offer a structured, flexible way to achieve your goals.

They’re not just for the wealthy — they’re for anyone who wants to take control of their legacy, safeguard what matters most, and ensure their wishes are carried out with care and confidence.

Understanding how trusts work is the first step. The next is seeking expert advice tailored to your unique circumstances.

With the right guidance, a trust can become a cornerstone of your financial and estate planning — offering peace of mind today and security for generations to come.

In addition to being regulated by the Solicitors Regulation Authority (the SRA) and ranked in legal directories (such as Chambers & Partners and Legal 500) many of the members of our Private Client  team are members of the Society of Trust and Estate Practitioners (STEP)  and have vast experience in the creation and administration of trusts. We have significant experience in the formation of private trust companies, charitable trusts, and foundations, and are well versed in the relevant associated tax implications.