A trust in estate planning is a legal arrangement in which people you choose, the trustees, hold and manage assets on behalf of others, the beneficiaries, under rules you set. Families use trusts to control how and when someone inherits, to provide for a vulnerable or younger beneficiary, and in some cases to help manage an inheritance tax or care fees position.
For most households in England and Wales a trust sits alongside a will rather than replacing it. This guide explains the main types of trust, how each is treated for inheritance tax, where trusts can and cannot help with care fees, and what setting one up involves. Figures are current as at August 2026 and are subject to change. This is general information, not advice for any individual set of circumstances.
What a trust actually is
A trust separates legal ownership of an asset from the benefit of it. The person who puts assets into the trust is the settlor. The trustees become the legal owners and must manage the assets under the terms of the trust deed and general trust law. The beneficiaries are the people who can benefit, whether through income, capital, or the use of an asset such as a home. HMRC describes a trust as a way of managing assets for people (gov.uk, trusts and taxes, as at August 2026, subject to change).
Trusts can be created during life, through a trust deed, or on death, through provisions written into a will. A trust written into a will is often called a will trust and only comes into effect once the person has died.
Why people use trusts in estate planning
A trust adds control that an outright gift or a simple will cannot. Common reasons families consider one include the following.
- Control over timing. Assets can be held until a child reaches a chosen age rather than passing at 18.
- Providing for someone vulnerable. A disabled or vulnerable beneficiary can be supported without giving them assets to manage directly.
- Second marriages and blended families. A trust can let a surviving spouse benefit from a home for life while preserving the capital for children from an earlier relationship.
- Keeping matters private. Unlike a grant of probate, the terms of a lifetime trust are not a public record.
- Tax and later-life planning. In some circumstances a trust forms part of considered inheritance tax planning, though the rules are detailed and the benefit depends heavily on individual facts.
The main types of trust
Several kinds of trust exist, and the label matters because each is taxed differently. The table below summarises the most common ones used in estate planning.
| Type of trust | How it works | Often used for |
|---|---|---|
| Bare trust | The beneficiary is fixed and has an absolute right to the assets and income, usually from age 18. | Simple gifts to a named child or grandchild. |
| Interest in possession | One beneficiary has the right to income or use of an asset, such as a home, with the capital passing to others later. | Providing for a spouse for life, then children. |
| Discretionary trust | Trustees decide which beneficiaries receive what, and when, from a chosen class of people. | Flexibility, vulnerable beneficiaries, blended families. |
Trust types and their features: gov.uk, types of trust, as at August 2026, subject to change.
How trusts are treated for inheritance tax
Trusts do not sit outside inheritance tax. Most discretionary trusts, and many interest in possession trusts created since 22 March 2006, fall under what HMRC calls the relevant property regime, which carries its own set of charges (HMRC Inheritance Tax Manual, gov.uk, as at August 2026, subject to change). There are broadly three points at which a charge can arise.
| Charge | When it applies | Rate |
|---|---|---|
| Entry charge | When you transfer assets into the trust during your lifetime, above the available nil-rate band. | Up to 20% on the excess |
| Ten-year (periodic) charge | On each tenth anniversary of the trust, on value above the available nil-rate band. | Up to 6% |
| Exit charge | When capital leaves the trust between anniversaries. | Proportion of up to 6% |
Source: gov.uk, trusts and inheritance tax and HMRC Inheritance Tax Manual. Rates as at August 2026, subject to change.
The nil-rate band is £325,000 (gov.uk, inheritance tax, as at August 2026, subject to change), and it is frozen until 5 April 2031 (gov.uk, as at August 2026, subject to change). Because many transfers into trust fall within the nil-rate band, the entry charge is often nil, but the figures depend entirely on what else has been given away in the previous seven years. The interaction with the seven-year rule for lifetime gifts is one reason this area is generally handled with professional input rather than a template.
A trust does not remove inheritance tax by itself. It changes when and how the tax is worked out, and whether an outcome helps depends on the specific facts.
- Nil-rate band: £325,000 (gov.uk, as at August 2026, subject to change).
- Standard inheritance tax rate on an estate above the threshold: 40% (gov.uk, as at August 2026, subject to change).
- Lifetime entry charge on transfers into most trusts above the nil-rate band: up to 20% (HMRC IHT Manual, as at August 2026, subject to change).
- Maximum ten-year charge on relevant property: 6% (HMRC IHT Manual, as at August 2026, subject to change).
Trusts and care fees
Trusts are often marketed in connection with care costs, and this is an area to approach with care. A trust may form part of planning for, limiting or mitigating the impact of care fees in some situations, but it cannot be used to sidestep a means test that has already become foreseeable. If a local authority decides that assets were placed in trust mainly to avoid paying for care, it can treat them as still belonging to the person under the deliberate deprivation of assets rules (gov.uk, Care and Support Statutory Guidance, as at August 2026, subject to change). Timing and motive both matter, which is why general guides cannot say whether a trust will help in a particular case. Our page on care home fees covers the means test in more detail.
Setting up and running a trust
A lifetime trust is created by a trust deed that names the settlor, the trustees, the beneficiaries and the terms. A will trust is created by the relevant clauses in a valid will, so it forms part of the wider job of writing a will. In both cases the trustees take on real duties, including keeping accounts, acting in the beneficiaries' interests, and meeting tax obligations.
Most trusts must also be registered with HMRC through the Trust Registration Service, and trustees may need to report and pay inheritance tax charges and file trust tax returns where they apply (gov.uk, register a trust as a trustee, as at August 2026, subject to change). Costs for drafting a trust vary widely with complexity, and reputable providers set out fees before any work begins; our pricing page explains how we approach this.
The drawbacks to weigh up
Trusts are not the right answer for every estate. They add cost and administration, the tax rules are detailed and can change, and once assets are settled the settlor usually gives up a degree of control. A trust that is poorly drafted or left unmanaged can create problems rather than solve them. For many families a well-drafted will, sensible use of allowances, and a lasting power of attorney achieve what they need without a trust at all. The value of a trust lies in matching the right structure to a genuine need, which is why it is worth taking advice before committing.
Trusts in Scotland and Northern Ireland
This guide describes the law of England and Wales. Scotland has its own body of trust and succession law, including legal rights that can entitle a spouse and children to a fixed share of an estate, and it uses confirmation rather than a grant of probate. Northern Ireland has a separate but broadly similar system to England and Wales. Where an estate or a trust touches more than one jurisdiction, it can be worth taking advice in each.
Frequently asked questions
What is a trust in estate planning?
A trust is a legal arrangement where trustees hold and manage assets for beneficiaries under terms set by the settlor. In estate planning it is used to control how and when people inherit, to provide for vulnerable or younger beneficiaries, and in some cases to help manage inheritance tax or care fees. It usually works alongside a will rather than replacing it (gov.uk, trusts and taxes, as at August 2026, subject to change).
Do trusts avoid inheritance tax?
Not by themselves. Most trusts fall within HMRC's relevant property regime, which can apply an entry charge of up to 20% above the nil-rate band, a ten-year charge of up to 6%, and exit charges when capital leaves. Whether a trust helps depends on the assets, the amounts and what has been given away before, so it cannot guarantee any particular outcome (gov.uk, trusts and inheritance tax, as at August 2026, subject to change).
What types of trust are there in the UK?
The most common in estate planning are bare trusts, where a named beneficiary has an absolute right to the assets, interest in possession trusts, where someone has a right to income or use of an asset with the capital passing on later, and discretionary trusts, where trustees decide who benefits and when. Each is taxed differently (gov.uk, types of trust, as at August 2026, subject to change).
Can a trust protect a home from care fees?
A trust may form part of planning for, limiting or mitigating the impact of care fees, but it cannot be used to avoid a means test that is already foreseeable. A local authority can treat assets placed in trust as still owned by the person under the deliberate deprivation of assets rules, so timing and motive matter and no outcome is assured (gov.uk, Care and Support Statutory Guidance, as at August 2026, subject to change).
Do I have to register a trust with HMRC?
Most trusts must be registered through the Trust Registration Service, and trustees may also need to file trust tax returns and report inheritance tax charges where they apply. The register is not open to the public in the way Companies House is. The exact requirements depend on the type of trust and its assets (gov.uk, register a trust as a trustee, as at August 2026, subject to change).
Is a trust the same as a will?
No. A will sets out who inherits your estate on death, while a trust is a way of holding assets for beneficiaries that can operate during life or after death. A trust can be created within a will, known as a will trust, so the two often work together rather than being alternatives (gov.uk, trusts and taxes, as at August 2026, subject to change).