Bare Trust
The simplest trust where beneficiaries have an absolute right to the capital and income. Trustees must follow beneficiaries' instructions.
A bare trust (or simple trust) is the most basic form of trust. The beneficiary has an absolute right to both the capital and income.
Key Features
- Beneficiary has immediate, unconditional right to assets
- Trustees are "bare" - they just hold legal title
- Trustees must follow the beneficiary's instructions (once over 18)
- No trustee discretion over distributions
Common Uses
- Holding assets for a child until they're 18
- Nominee accounts (where assets are held in a name other than the owner's)
- Simple gifts with age conditions
- ISA investments for children
Tax Treatment
- Income and gains are taxed as the beneficiary's, not the trustee's
- No inheritance tax entry charge (it's a PET)
- No 10-yearly IHT charges
- If settlor is a parent and child is under 18, different rules apply
Bare Trust vs Discretionary Trust
In a bare trust, beneficiaries can demand their assets at 18. In a discretionary trust, trustees decide if and when to distribute. Bare trusts are simpler but offer less control.
Common questions
When does a child get their bare trust money?
At 18, they can demand the full amount. Before then, trustees control it but must use it for the child's benefit.
Can I set up a bare trust and change my mind?
No. Once assets are in a bare trust, they belong to the beneficiary. You cannot take them back.
Is a Junior ISA a bare trust?
Yes. The money belongs to the child absolutely. At 18, they can do whatever they want with it.
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