Trusts and Estate Planning in England and Wales

What is a trust?

A trust is a legal arrangement where trustees hold assets on behalf of beneficiaries, under terms set by the person who created it. Legal ownership and the benefit of the assets are split between different people.

Three roles matter. The settlor is the person who puts assets into the trust. The trustees are the people who legally hold and manage those assets, and they owe a fiduciary duty to act in the beneficiaries’ interests rather than their own. The beneficiaries are the people who benefit, whether that means receiving income, capital, or the right to live somewhere. The trust document, sometimes called the trust deed or trust agreement, sets out what the trustees can and cannot do, including how the fund is managed and who oversees its management.

What types of trust are there?

The most common are bare trusts, discretionary trusts, and interest in possession trusts, including life interest trusts used in wills. Each suits a different problem.

• Bare trust. The beneficiary has an absolute right to the assets and income, and takes them outright at 18. Simple, and often used to hold money for a child.
• Discretionary trust. Trustees decide which beneficiaries receive what and when, from a class of potential beneficiaries. Useful where circumstances may change, or where a beneficiary cannot be trusted with a lump sum.
• Interest in possession trust. One beneficiary has the right to income or to use an asset now, with capital passing to others later. A life interest trust in a will is the classic version.

A life interest trust is the one most relevant to couples. It lets a surviving partner live in the home for life, while guaranteeing the capital eventually passes to the children you name. That is why it comes up so often alongside mirror wills for blended families.

When is a trust actually worth setting up?

Trusts solve specific problems: protecting assets for children from a previous relationship, or providing for a vulnerable beneficiary. For a straightforward estate, a will alone is usually enough.

The situations where a trust genuinely earns its cost are reasonably narrow. Blended families, where you want your partner provided for but your own children to inherit eventually. A beneficiary who has a disability, an addiction, or simply cannot manage money, where asset protection genuinely matters. A business or property you want held together rather than split. Concern about a child’s inheritance being lost in a divorce. A trust like this works best as part of wider estate planning, alongside your will and any lasting power of attorney, rather than as a document on its own. If none of these apply and your wishes are straightforward, a solicitor-checked will at £19.99 does the job without the ongoing obligations a trust brings.

Can a trust protect your home from care fees?

Sometimes, but not reliably, and putting your home into a trust specifically to avoid care fees can be challenged as deliberate deprivation of assets. This is the most misunderstood use of trusts in the UK.

Local authorities can look at whether you disposed of an asset in order to reduce what you would pay towards care. If they decide you did, they can assess you as though you still owned it, which means the trust achieves nothing while still costing you to set up. There is no fixed time limit that makes such a transfer safe. Trusts can play a legitimate role in planning, particularly a life interest trust created in a will rather than a lifetime transfer. Anyone told a trust will simply shelter their house from care fees is being oversold.

What are a trustee’s duties?

Trustees must act in the beneficiaries’ best interests, follow the trust document, keep accurate records, and manage the assets with reasonable care. It is a legal responsibility, not an honorary title.

Trustees owe a fiduciary duty, meaning they cannot put their own interests first or profit personally from the role. They must act impartially between beneficiaries, invest sensibly, keep the trust’s finances separate from their own, and be able to account for their decisions. Trustees can be held personally liable for losses caused by a breach of duty, and a beneficiary can take the matter to court. Where a trust is created by a will, the executor passes the relevant assets to the trustees once the estate is settled. Choosing someone willing and capable matters as much as choosing the right type of trust.

Do trusts have to be registered?

Most UK trusts must be registered with HMRC’s Trust Registration Service, including many trusts that have no tax at all to pay. Registration is a compliance obligation, with penalties for missing it.

The Trust Registration Service covers express trusts and certain others, with a limited set of exclusions. Trustees are responsible for registering and for keeping the details up to date when they change. This is one of the ongoing administrative burdens people underestimate when they set a trust up, alongside accounts, tax returns where relevant, and the trustees’ record-keeping.

What does a trust cost to set up and run?

Expect solicitor fees to create the trust, plus ongoing costs for administration, accounts, and any tax returns each year. Cost is why a trust rarely makes sense for a straightforward estate.

Setting up costs vary widely depending on the type of trust and the complexity of the assets, so get a fixed quote before instructing anyone. The running costs are the part people miss: trustees may need professional help with accounts, valuations, and registration, year after year. Against that, a trust that solves a genuine problem, such as guaranteeing children from a first marriage inherit, can be worth many times what it costs.

Our protective will trust is a fixed price of £1,495 including VAT. That is the cost of setting the trust up correctly, with no hourly billing and no surprise at the end. Ongoing trustee and tax costs, where they apply, sit outside that fee, and we will tell you honestly whether a trust is worth it for your situation before you commit to anything.

How are trusts taxed?

Trusts have their own tax treatment, and some face inheritance tax charges every ten years as well as on assets leaving the trust. Tax is the area where getting advice matters most.

Different types of trust are taxed differently, and the position depends on the assets, the type of trust, and the settlor’s circumstances. Relevant property trusts, which includes most discretionary trusts, can face a periodic inheritance tax charge on each ten-year anniversary and an exit charge when assets leave. Income and capital gains tax also apply, with their own rules for trustees. Check gov.uk’s guidance on trusts and taxes and take advice from a solicitor or financial advisor before setting one up, since the wrong structure can cost more than it saves.

Frequently asked questions

Is it worth setting up a trust in the UK?

It depends entirely on the problem you are solving. Trusts are worth it for blended families, vulnerable beneficiaries, or controlling when someone inherits. For a straightforward estate where you simply want to name who gets what, a will alone does the same job for far less.

How much does it cost to start a trust in the UK?

Costs vary widely by trust type and asset complexity, so always get a fixed quote first. Remember the ongoing costs too, since trustees may need help with accounts, tax returns and registration each year, which often exceeds the initial set-up fee over time.

What are the disadvantages of a trust?

Cost, complexity, and permanence. Trusts carry set-up and running costs, and trustees take on real legal duties and potential personal liability. Most must be registered with HMRC, and once assets are in, unwinding the arrangement is not always straightforward or cheap.

Do I need a solicitor to set up a trust?

Strongly recommended. Trust law, the registration requirements and the tax treatment are all technical, and an incorrectly drafted trust can fail to do what you intended while still costing you to maintain. This is not an area where a template serves you well.

Can I put my house in a trust to avoid care fees?

Not reliably. A local authority can treat the transfer as deliberate deprivation of assets and assess you as though you still owned the home. There is no safe time limit that removes this risk. Anyone promising a trust will simply shelter your house is overselling it.