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Trusts

Lifetime Trusts Explained

A lifetime trust is one you set up while you are alive, handing assets to trustees to hold for people you choose, rather than leaving it all to your will.

10 min read · Written by the Fairchild Oldfield team · Last reviewed: July 2026

90 days
Most new lifetime trusts must be registered with HMRC's Trust Registration Service, generally within 90 days of being created, whether or not any tax is due.
Source: gov.uk, as at July 2026, subject to change.

A lifetime trust is a trust you create during your lifetime, rather than one written into your will to take effect on death. You place cash, property or investments under the control of trustees, who hold and manage them for the people you name as beneficiaries.

Lifetime trusts, sometimes called inter-vivos or living trusts, are one of the more flexible tools in estate planning, though they are not right for everyone. This guide explains how they work, the people involved, the main types, how they are taxed, and where care fees fit in. It forms part of our wider Trusts Explained guide and our estate planning guide. Figures are current as at July 2026 and are subject to change.

What is a lifetime trust?

A lifetime trust is a legal arrangement, made while you are alive, in which you give assets to trustees to hold for your chosen beneficiaries under the terms of a trust deed. It differs from a will trust, which is created by your will and only comes into being when you die. Because it operates during your lifetime, a lifetime trust can start working straight away and does not wait for probate.

The three roles: settlor, trustee and beneficiary

Every trust involves three roles, and one person can hold more than one of them. The settlor creates the trust and puts assets into it. The trustees legally own and manage those assets and must act in the beneficiaries' interests. The beneficiaries are the people who can benefit, whether from income, capital, or both, depending on how the trust is written.

RoleWho they areWhat they do
SettlorThe person setting up the trust (the truster in Scotland)Transfers assets in and sets the terms in the trust deed
TrusteeOne or more people, or a companyLegally hold and manage the assets, and deal with any tax due
BeneficiaryOne person, a group, or a class such as "my grandchildren"Can receive income, capital, or both, under the trust terms

General roles based on gov.uk, trusts and taxes, as at July 2026, subject to change.

The main varieties

Common types of lifetime trust

The right structure depends on how much control you want to keep and who you want to benefit. These are the types most often used in lifetime planning.

Bare trust

The beneficiary is fixed and, once an adult, is entitled to the assets outright. Simple, but with little ongoing control.

Interest in possession

One beneficiary has a right to the income as it arises, while capital is often preserved for others later.

Discretionary trust

Trustees decide who benefits, how much, and when, from a class of beneficiaries. Flexible, with its own tax treatment.

Trust types based on gov.uk, types of trust, as at July 2026, subject to change.

Lifetime trust vs will trust

The main difference is timing. A lifetime trust is set up and funded while you are alive, so it operates immediately and can hold assets for years. A will trust is created by your will and only springs into existence on death. Both can serve similar goals, such as providing for children or a vulnerable relative, but they behave differently during your lifetime and are taxed on different footings.

FeatureLifetime trustWill trust
When it startsDuring your lifetimeOn your death
Assets usedAssets you transfer nowAssets left by your will
Control while aliveYou can act as a trustee and see it workNothing happens until death
Common purposeLifetime gifts, provision for family, some care planningProtecting a share of an estate, provision for a spouse then children

For the death-based option, see our guide to will trusts. Many people considering property specifically also look at putting your house in a trust, which carries its own tax and care considerations.

The tax position

How lifetime trusts are taxed

Lifetime trusts have their own tax treatment, separate from your personal position, and it can be involved. Putting assets into many discretionary or relevant property trusts is a chargeable transfer, and where the value transferred is above the nil-rate band of £325,000, an entry charge may apply, calculated at 20% where the trustees pay (gov.uk, trusts and Inheritance Tax, as at July 2026, subject to change).

These trusts can also face charges over time. Inheritance tax is charged up to a maximum of 6% on assets transferred out of a trust, and there are periodic charges tied to each ten-year anniversary (gov.uk, as at July 2026, subject to change). Income and capital gains within a trust are taxed under separate rules again, so trust taxation is generally an area where people take professional advice.

See our fuller Trusts Explained guide for how the different taxes interact.

Charge on assets leaving a trust

Up to 6%

Inheritance tax is charged up to a maximum of 6% on money, land or buildings transferred out of a relevant property trust, with the exact figure depending on the trust and its value (gov.uk, as at July 2026, subject to change).

Lifetime trusts and care fees

Lifetime trusts are sometimes marketed as a way to keep the family home away from care costs, and this is where caution matters most. If a local authority decides assets were placed in trust deliberately to reduce what you pay towards care, it can treat you as still owning them under the deprivation of assets rules, so the trust may not achieve what was hoped. This is general information about limiting the impact of care fees, not a route to deliberately avoid them.

The wider point is that a lifetime trust rarely does one job cleanly. Giving assets away can also count as a gift for inheritance tax and, where you keep the benefit of what you gave, it can be caught as a gift with reservation of benefit and stay in your estate (gov.uk, rules on giving gifts, as at July 2026, subject to change). Because care, tax and family-law issues overlap, it can be worth discussing with a qualified professional before setting anything up.

A worked example (illustration only). Suppose someone transfers £400,000 of investments into a discretionary trust for their grandchildren. Because that is above the £325,000 nil-rate band, the excess of £75,000 could attract an entry charge, calculated at 20% where the trustees pay, giving roughly £15,000 (gov.uk, as at July 2026, subject to change). Later, assets leaving the trust can face a charge of up to 6% (gov.uk, as at July 2026, subject to change). The real figures turn on the settlor's earlier gifts, reliefs and timing, so this is general information, not a calculation for any real trust.

Setting up a lifetime trust

Setting up a lifetime trust generally means choosing the type, drafting a trust deed, appointing trustees and transferring assets in. Because a trust is a lasting legal structure with tax and reporting duties, many people involve a solicitor or a STEP practitioner rather than using a template. Where investments, life policies or pensions are involved, general information only applies here and it can be worth speaking to an FCA-authorised adviser.

  1. Decide the purpose. Who you want to benefit, and how much control you want to keep.
  2. Choose the type. Bare, interest in possession or discretionary, each with its own tax treatment.
  3. Draft the trust deed. The document that names the parties and sets the rules.
  4. Appoint trustees. A trust needs at least one trustee at any time to run it.
  5. Transfer assets and register. Fund the trust, then register it with HMRC's Trust Registration Service, generally within 90 days of creation (gov.uk, register a trust as a trustee, as at July 2026, subject to change).

What trustees take on

Running a lifetime trust

I

Hold the assets

Trustees become the legal owners and must keep trust property separate from their own.

II

Act for beneficiaries

Decisions are made in the beneficiaries' interests, following the trust deed.

III

Handle the tax

Trustees deal with any income, gains or inheritance tax the trust owes. Source: gov.uk, as at July 2026, subject to change.

IV

Keep records

Registration and reporting duties continue for the life of the trust.

Lifetime trusts in Scotland and Northern Ireland

This guide describes the law of England and Wales. Trusts exist across the UK, but the surrounding law differs. In Scotland the person creating the trust is usually called the truster, succession law follows its own rules including legal rights for a spouse and children, and bare trust ages differ. Northern Ireland has a separate but broadly similar system to England and Wales. Inheritance tax itself is UK-wide, so the £325,000 nil-rate band applies across all four nations (gov.uk, as at July 2026, subject to change). Where a trust touches more than one nation, it can be worth taking advice in each.

Frequently asked questions

What is a lifetime trust?

A lifetime trust is a trust set up while you are alive, in which you give assets to trustees to hold for beneficiaries under a trust deed. Unlike a will trust, which only starts on death, it operates during your lifetime. People use them for lifetime gifts, providing for family, and sometimes as part of wider planning, depending on their circumstances.

What is the difference between a lifetime trust and a will trust?

The main difference is timing. A lifetime trust is created and funded while you are alive, so it works straight away. A will trust is written into your will and only comes into being when you die. They can share purposes, such as providing for children, but they are taxed differently and behave differently during your lifetime. Our will trusts guide covers the death-based option.

Are lifetime trusts taxed?

Yes, and the rules can be involved. Transferring assets above the £325,000 nil-rate band into many trusts can attract an entry charge, calculated at 20% where trustees pay, and assets leaving a trust can face a charge of up to 6% (gov.uk, as at July 2026, subject to change). Income and gains are taxed separately, so many people take advice.

Can a lifetime trust keep my home away from care fees?

Trusts are sometimes promoted this way, but caution is needed. If a local authority finds assets were placed in trust deliberately to reduce care contributions, it can apply the deprivation of assets rules and treat you as still owning them. A trust can be part of planning that limits the impact of care fees, but it is not a way to deliberately avoid them, and it can be worth discussing with a qualified professional first.

Do I need to register a lifetime trust?

Most new lifetime trusts must be registered with HMRC's Trust Registration Service, generally within 90 days of being created, whether or not any tax is due (gov.uk, as at July 2026, subject to change). Trustees are usually responsible for registering and keeping the record up to date. A small number of trusts are excluded, so checking the current position can help.

Can I be a trustee of my own lifetime trust?

Often yes. A settlor can also act as a trustee, which lets you stay involved in how the assets are managed. A trust needs at least one trustee at any time, and trustees must act in the beneficiaries' interests rather than their own. Acting as both settlor and trustee can affect the tax position in some cases, so this is one point many people check with an adviser.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

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