Trusts
About Trusts
Trust planning is about making sure more of your wealth reaches your family and less of it is lost to tax, legal complications, or circumstances you didn't plan for.
A trust is a legal arrangement where your assets are held by trustees for the benefit of the people you choose. Unlike a will, which simply says who gets what, a trust gives you control over how
and when they receive it.
Setting up a trust can remove assets from your estate for inheritance tax purposes, protect wealth from divorce or financial difficulty, and provide for family members who aren't ready to manage a lump sum. That could mean a discretionary trust for flexibility, a family trust to hold property for your children, or a specialist structure like a discounted gift trust or loan trust.
There are over 733,000 active trusts registered with HMRC in the UK, and around 115,000 new trusts were created in the twelve months to March 2024. With business property relief now capped from April 2026 and pensions being brought into estates from April 2027, that number is likely to keep rising.
At Vintage Wealth Management, we start by understanding what you own, who you want to provide for, and what you're trying to protect. From there, we work through what applies to you and help you put it in place. We've got an in-house solicitor who specialises in trust documentation, and our advisers coordinate the tax, investment, and legal elements so nothing falls between the gaps.
How do trusts work?
A trust works by transferring assets out of your ownership and into the hands of trustees, who hold and manage them for the people you want to benefit. You set the rules through a trust deed: who the beneficiaries are, what they can receive, and when. In trust law, the person setting up the trust is called the settlor.
Once assets are in trust, they're no longer part of your estate. That's why trusts are so widely used in inheritance tax planning. But you have to genuinely give up control. If you continue to use or benefit from assets you've placed in trust, HMRC may treat them as still forming part of your estate under the gift with reservation rules.
You can set up a trust during your lifetime or through your will. Lifetime trusts take effect immediately and can start reducing your estate straight away. Will trusts only come into existence on death, after probate. Either way, you'll need a solicitor to draft the trust deed, and most trusts need to be registered with HMRC within 90 days of creation.
What types of trusts are used in estate planning?
There are several types of trusts. They differ in how much control you keep, how beneficiaries receive assets, and how the trust is taxed.
A life interest trust gives one beneficiary the right to income from the trust, or the right to live in a trust property, for the rest of their life. When they die, the capital passes to the remaining beneficiaries. You see these most often in wills where someone wants to look after a surviving partner while making sure children ultimately inherit. The life tenant's interest forms part of their estate for inheritance tax purposes, so it'll be included when calculating their IHT liability on death.
Life interest trusts
Nil rate band discretionary trust
A nil rate band discretionary trust is created through a will. It places assets up to the value of the nil rate band (£325,000) into a discretionary trust on the first death, using the deceased spouse's allowance immediately rather than relying on the transferable nil rate band.
Blended families use these a lot, particularly where you want to protect assets for children from a previous relationship while still providing for a surviving spouse. If the family home goes into this type of trust, the estate can lose access to the residence nil rate band (£175,000), so the numbers need modelling before you commit.
A bare trust holds assets for a named beneficiary who has an absolute right to both the income and the capital. Once they reach 18, they can demand the assets at any time. A gift into a bare trust is a potentially exempt transfer, so it falls outside your estate entirely if you survive seven years.
Bare trusts are often used for children or grandchildren. The simplicity is also the limitation. If you're concerned about a young beneficiary gaining full control at 18, a discretionary trust gives more flexibility over when and how they receive the funds.
Bare trusts
Discretionary trusts
A discretionary trust gives trustees full control over who benefits, how much they receive, and when. No beneficiary has a fixed entitlement. This is the most flexible structure available and the one we use most often for blended families, young beneficiaries, or where future grandchildren need including.
If the value you settle into the trust exceeds your available nil rate band (£325,000), there's an immediate IHT charge at 20% on the excess. The trust is then subject to a periodic charge of up to 6% every ten years and exit charges when capital is distributed. Income is taxed at 45% on non-dividend income and 39.35% on dividends. From April 2027, savings and property income rises to 47%
A discounted gift trust allows you to gift a lump sum into a trust while keeping fixed regular payments for life. The trust is usually invested in an investment bond and the payments come from the bond's 5% annual tax-deferred withdrawal facility. You retain the right to those payments, so their estimated value (the "discount") never leaves your estate.
The rest is a gift, and any growth on the investment sits outside your estate from day one. These trusts suit people who want to reduce their estate but need to keep an income. You'll need medical underwriting, and your age and health determine the size of the discount.
Discounted gift trusts
Loan trusts
A loan trust works by lending capital to the trust rather than gifting it. The original loan stays in your estate, but any investment growth sits outside it immediately. You can request repayment of the loan at any time and in any amount, so you keep full access to your capital while the growth accumulates outside your estate. The seven-year rule does not apply because no gift has been made. The benefit builds over time as that growth compounds.
Can you put your house in a trust?
Yes. Your home is often the most valuable thing you own, and a trust can make sure it ends up where you want it to go. If you're worried about what happens to the property if your surviving spouse remarries, or if you want to make sure children from a previous relationship are protected, a property trust can help.
A life interest trust created through a will is how most people do this. Your surviving spouse keeps the right to live in the property for the rest of their life, and on the second death the property passes to the children. Because the trust only takes effect on death, there's no gift with reservation problem.
Transferring your home into a trust while you're still living in it is more complicated. If you continue to live in the property without paying a full market rent, HMRC will treat it as still part of your estate under the gift with reservation rules, and the inheritance tax benefit disappears. There are also capital gains tax and stamp duty land tax implications. We model this as part of the estate review so you can see exactly what works and what doesn't before anything is put in place.
What's changed in 2026 and what's coming in 2027?
From 6 April 2026, business property relief has been capped. The 100% relief that previously applied without limit is now restricted to £1 million per individual, with relief at 50% above that. AIM-listed shares have moved to a flat 50% relief regardless of value.
Trusts created before 30 October 2024 benefit from transitional rules and retain previous relief levels until their next ten-year anniversary, at which point they'll receive their own £1 million allowance.
From April 2027, unused pension funds will be brought into your estate for inheritance tax purposes. If you've been leaving your pension alone to pass on to your family, the strategy needs a rethink. The order you draw down pensions, ISAs, and other assets will affect how much IHT your estate ends up paying, and trusts may do more of the heavy lifting on the non-pension side.
If you've got existing trusts or you're thinking about setting one up, we're already helping clients review their positions in light of both changes.
Why work with Vintage Wealth Management.
Why work with Vintage Wealth Management.
Trust planning doesn't sit in a silo. Your pensions, investments, property, and protection all feed into it. We look at the full picture and build a plan you can act on. Vintage Wealth Management has been advising on trust and estate planning for over a decade. We're named in the FT Adviser UK Top 100 Financial Advisers every year since 2021, and our team includes Chartered Financial Planners, Fellows of the Personal Finance Society, and an in-house solicitor who specialises in wills, trusts, and powers of attorney. We've got offices in Central London, North West London, Portsmouth, Buckinghamshire, Swindon, and Dublin, and we work with clients across the UK.
Frequently asked questions about venture capital trusts
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A will sets out who inherits your assets and takes effect on death through probate. A trust gives you control over how and when beneficiaries receive assets, and can operate during your lifetime or after death. Most estate plans use both together.
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A straightforward discretionary trust typically costs between £1,000 and £3,000 for the legal documentation. More complex structures involving property or business assets can cost more. You'll also have ongoing costs: annual tax returns, trustee administration, and periodic reviews.
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Yes, but you can't be the sole trustee of a trust you create if you're also a beneficiary. In practice, many trusts have a combination of family members and a professional trustee. If you retain too much control, HMRC may argue that the assets haven't genuinely left your estate.
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Most UK express trusts must be registered with HMRC's Trust Registration Service within 90 days of creation, even if there's no tax liability. Certain trusts are exempt, including will trusts that hold assets for less than two years after death and trusts for bereaved minors. Failure to register can result in a penalty of up to £5,000.
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Trusts can reduce inheritance tax by removing assets from your estate, but the outcome depends on the type of trust, the value transferred, and whether you survive seven years after making the transfer. Discretionary trusts also carry their own periodic and exit charges. Whether a trust saves more than it costs depends on the numbers, and that's something we model with you.
Disclaimer
The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor. Business Property Relief (BPR) is subject to HMRC rules and may change in the future. Qualification depends on individual circumstances and is not guaranteed. Investments that aim to qualify for BPR, such as shares in smaller or unlisted companies, carry higher risk and their value can fall as well as rise. Investors may not get back the full amount invested. BPR typically requires assets to be held for at least two years and relief will only apply if the qualifying conditions are met at the time of death. Your capital is at risk – your investment can fall as well as rise in value so you could get back less than you invest. In addition, because AIM-listed companies tend to be smaller, more volatile and subject to less stringent checks than those quoted on the main London Stock Exchange, the risks are greater. The Financial Conduct Authority do not regulate tax planning or trusts. The information contained within this communication does not constitute financial advice and is provided for general information purposes only. Links to related sites have been provided for information only. Their presence on this blog does not mean that the firm endorses any of the information, products or views published on these sites. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.