A trust is a legal arrangement where trustees hold and manage assets for someone else (the beneficiary). It separates legal ownership (the trustees) from beneficial ownership (the beneficiary).

Trusts are set up using a trust deed, which sets out:

• what assets are in the trust
• who the beneficiaries are
• how the trustees should manage everything
• when the beneficiaries can receive funds

Trusts are commonly used in estate planning because they offer control, flexibility, and long term protection of family wealth.

People set up trusts for a wide range of personal and financial reasons. The most common include:

• Protecting family assets: Trusts help ensure that money or property is safeguarded for children, grandchildren, or vulnerable beneficiaries.
• Reducing inheritance tax exposure: Assets placed into certain types of trusts may fall outside the estate for inheritance tax purposes, depending on timing and structure.
• Controlling how assets are used: You can specify when beneficiaries receive funds, such as on reaching adulthood, for education, or for major life events.
• Providing ongoing financial management: Trusts allow assets to be invested and professionally managed over many years.
• Protecting assets in case of divorce, bankruptcy, or poor financial decisions: A trust ring fences assets so beneficiaries cannot easily lose or misuse them.

They can be but tax treatment varies depending on the type of trust and the circumstances.

• Inheritance Tax (IHT): Trusts may help reduce IHT by taking assets out of the settlor’s estate, subject to certain rules and thresholds.
• Income Tax: Trust income may be taxed differently depending on the trust. Trustees often pay tax at a higher rate, but beneficiaries may reclaim some of it depending on their own tax position.
• Capital Gains Tax (CGT): CGT may apply when assets are transferred into or out of a trust, but there are reliefs (such as hold over relief) that can reduce or defer the tax.
• Ongoing charges: Some trusts are subject to 10 yearly (periodic) charges and exit charges, depending on value.
  Due to these complexities, trusts must be planned carefully, ideally with professional advice to maximise any tax advantages.

You can reduce UK Inheritance Tax by using your tax‑free allowances (the £325,000 nil‑rate band and £175,000 residence nil‑rate band) to pass on up to £1 million as a couple. Note the residence nil rate band tapers once your gross estate exceeds £2m. Making annual gifts, small gifts, or larger gifts that fall outside your estate after seven years can also lower your taxable estate. Other effective tools include leaving 10% to charity to reduce the tax rate, using trusts, keeping pensions updated, and applying Business or Agricultural Relief – although these reliefs will be capped from April 2026.

Our advisers range from 35 plus years’ experience all the way to newly qualified ones. We have experience and expertise in all aspects of personal, business and trust clients. Hence, we are confident that we will have all the experience, qualifications and knowledge to assist you on your financial planning journey.