Setting up a trust for a child means handing money, investments or property to trustees who hold it for the child under rules you set, rather than giving it outright. The main decision, and the one most guides skip, is bare versus discretionary, because that choice fixes whether the child can claim everything at 18.
What is a trust for a child, and who is involved?
A trust for a child is a legal arrangement where trustees hold assets for the child under terms set by the person who created it. Three roles matter: the settlor, who provides the assets and sets the rules; the trustees, who legally own and manage them; and the beneficiary, here the child. Grandparents, parents and other relatives all commonly act as settlor.
The trust can start in your lifetime, funded now, or be written into your will so it takes effect only when you die. A valid trust needs a clear intention, identifiable assets and an identifiable beneficiary, and anything involving land must be in writing (gov.uk, as at August 2026, subject to change). Our guide to using trusts in estate planning covers the wider picture.
Which type of trust is best for a child: bare or discretionary?
For a child, the practical choice is almost always a bare trust or a discretionary trust, and it hinges on control. A bare trust is simple and tax-light, but the child is absolutely entitled to the whole fund at 18 in England and Wales. A discretionary trust keeps the timing and amounts in the trustees' hands for longer, at the cost of more tax and admin.
| Feature | Bare trust | Discretionary trust |
|---|---|---|
| Who is entitled | One named child, absolutely | A class (for example all your grandchildren); trustees decide |
| When the child gets it | Can demand the whole fund at 18 | When and if the trustees choose, no fixed age |
| Control after 18 | None, it is the child's | Trustees keep control for years |
| Tax weight | Light: taxed largely as the child's own | Heavier: entry, 10-year and exit charges plus higher income tax |
| Best for | Straightforward saving for one responsible child | Larger sums, several children, or where 18 is too young |
Source: gov.uk types of trust, as at August 2026, subject to change. Our guide to family trusts explains discretionary trusts in more depth.
How do you set up a trust for a child?
Setting up a lifetime trust for a child follows a set order, from deciding the purpose through to registering with HMRC. The type of trust and the choice of trustees matter most, because both are hard to change once the deed is signed. The steps below show the usual route in England and Wales.
- Decide the purpose and the age. Work out what the money is for and when you want the child to have it. If 18 feels too early, that points to a discretionary trust rather than a bare one.
- Choose the type of trust. Match the aim to a bare or discretionary trust, and decide whether it starts now or through your will. This is the step most worth taking advice on.
- Appoint trustees. Choose at least two adults you trust to manage the assets for years, since they take on legal duties. A family member, a friend, a professional or you can serve.
- Draft the trust deed. A written deed sets out the trustees' powers, the beneficiaries and the rules, usually with a letter of wishes to guide discretion. A will trust is written into the will instead.
- Transfer the assets. Move the cash, investments or property into the trust so it legally holds them. For a lifetime trust this is the point any inheritance tax entry charge is measured.
- Register with the Trust Registration Service. Most trusts must be registered with HMRC, generally within 90 days of being set up, and kept up to date (gov.uk, as at August 2026, subject to change).
General steps only, not personal advice. The right structure depends on your circumstances. You can book a consultation to talk yours through.
How is a trust for a child taxed?
A trust for a child can meet three taxes: income tax, capital gains tax and inheritance tax. A bare trust is the lighter option, taxed largely as if the assets were the child's own, so the child's personal allowance (£12,570 for 2026 to 2027) can shelter a fair amount. A discretionary trust is taxed at trust rates: up to 45% on income, or 39.35% on dividends, above a £500 tax-free amount (reduced to £100 where the settlor has several trusts) (gov.uk trusts and Income Tax, as at August 2026, subject to change).
One rule catches parents out. If a parent sets up a trust for their own minor child and it produces more than £100 of income a year, all that income is taxed on the parent, not the child (gov.uk, as at August 2026, subject to change). It does not apply to gifts from grandparents, which is why grandparents often fund children's trusts instead.
Trustees also have a capital gains tax annual exempt amount of £1,500 for 2026 to 2027, half an individual's £3,000. Putting more than your £325,000 nil-rate band into a discretionary trust in your lifetime can trigger an immediate 20% inheritance tax entry charge, plus later 10-year and exit charges. The nil-rate band is frozen until 5 April 2031 (gov.uk, as at August 2026, subject to change). Our inheritance tax guide explains the band in full.
How much does it cost to set up a trust for a child?
Cost depends on the type of trust, and the figures below are common UK market ranges seen in 2026, not official rates. A trust written into your will adds only a modest amount; a standalone lifetime trust, and its ongoing administration, costs more. Weigh any figure against what the trust actually achieves before committing.
| Type of cost | Typical range (2026 market) | What it covers |
|---|---|---|
| Will trust for a child | Around £150 to £300 | Added to the cost of writing a will |
| Standalone lifetime trust | From about £850, rising to £2,000 or more | Higher where property or several assets are involved |
| Ongoing trustee administration | Around £200 to £600 a year | Trust tax returns and record-keeping |
Indicative market ranges, not official figures or a quote. Our pricing page sets out our own fees.
What people get wrong (from practice)
Three misunderstandings come up again and again when families ask us to set up a trust for a child: confusing it with a Child Trust Fund, expecting a bare trust to pay out later than 18, and assuming a trust always beats a simpler account. Clearing these up early often changes which route people choose.
A Child Trust Fund is not the same thing. A Child Trust Fund is a specific government savings account for children born between 1 September 2002 and 2 January 2011, now closed to new accounts (gov.uk, as at August 2026, subject to change). Setting up a trust is a separate legal arrangement, so meaning one while searching for the other sends people down the wrong path.
The age-18 surprise on bare trusts. Parents often picture a bare trust paying out at 21 or 25. It does not: at 18 the child can demand the entire fund and spend it as they wish. If that worries you, a discretionary trust is the tool that holds the money back, not a bare trust with a hopeful note attached.
A trust is not always the answer. For straightforward saving, a Junior ISA (£9,000 a year for 2026 to 2027, growing tax-free) often does the job with no deed, no registration and no trust tax return, though it too pays out at 18 (gov.uk, as at August 2026, subject to change). A trust earns its cost when you need control past 18, are providing for several or vulnerable children, or are moving larger sums as part of wider estate planning.
Frequently asked questions
Common questions on setting up a trust for a child cluster around four points: how much you need, when the child can access the money, whether grandparents can set one up, and how it is taxed. The short answers are below, with links to the relevant gov.uk guidance, though your own position may change them.
How much money do you need to set up a trust for a child?
There is no legal minimum, so a trust can hold a small sum or a large one. In practice the set-up and running costs mean a standalone lifetime trust is usually worth it only for larger amounts, often several thousand pounds or more, while a will trust or a Junior ISA can suit smaller savings (gov.uk, as at August 2026, subject to change).
At what age can a child access a trust fund?
With a bare trust, the child is absolutely entitled at 18 in England and Wales and can demand the whole fund then. With a discretionary trust there is no fixed age: the trustees decide when and how much the child receives, which is how families keep control past 18 (gov.uk, as at August 2026, subject to change).
Can grandparents set up a trust for a grandchild?
Yes. Anyone can set up a trust for a child, and grandparents often do. A tax advantage helps here: the £100 rule that taxes trust income on a parent does not apply to gifts from grandparents, so a grandchild's own personal allowance can usually cover more of the income (gov.uk, as at August 2026, subject to change).
Do you pay tax on a trust fund for a child?
Often, yes. A bare trust is taxed largely as the child's own, so their allowances can reduce or remove the bill. A discretionary trust pays income tax at up to 45%, has a reduced capital gains allowance of £1,500 for 2026 to 2027, and can face inheritance tax charges (gov.uk, as at August 2026, subject to change).