Bare trusts

Osbornes Law’s private client team sets up and advises on bare trusts, one of the simplest ways to hold assets for someone else, whether that’s a gift to a child, a joint property arrangement, or part of wider estate planning.

What is a bare trust?

A bare trust holds assets in a trustee’s name, but the beneficiary is treated as owning them outright from the moment the trust is created. There’s no discretion involved: once you’ve put something into a bare trust, the beneficiary is entitled to it, and to any income it produces, straight away.

This makes bare trusts simple to set up and cheap to run, but it also means you can’t change your mind later about who benefits or when. We’ll talk through whether that trade-off suits your circumstances before recommending one, rather than assuming it’s right just because it’s the easiest option.

What is a bare trust used for?

Bare trusts turn up in a few common situations:

• Gifts to children or grandchildren. A child can’t hold land in their own name, and many investments can’t be held directly by a child, but a child can be the beneficiary of a bare trust until they turn 18 (16 in Scotland).
• Joint ownership of property, where the trust simply reflects who holds the legal title and who has the underlying beneficial interest.
• Nominee arrangements, where one person holds an asset on paper for another for administrative convenience.

Setting up a bare trust

You’ll need a trust deed setting out what’s being put into the trust, who the trustee is, and who the beneficiary is. Because a bare trust gives the beneficiary an absolute right to the assets, there’s less ongoing decision-making for trustees than with a discretionary trust, but it’s still worth getting the deed drafted properly so there’s no ambiguity later about what was intended.

You can act as trustee yourself, often alongside a co-trustee, and many parents and grandparents do exactly that when setting up a bare trust for a child.

How is a bare trust taxed?

Because the beneficiary is treated as the owner from the outset, a gift into a bare trust is generally taxed as if you’d given the assets directly to that person.

For Inheritance Tax, this means the gift is a potentially exempt transfer: it falls outside your estate, and becomes fully tax-free, if you survive seven years from the date of the gift. For Capital Gains Tax, the beneficiary, not the trustee, is treated as the owner of the asset, so any gain is calculated and taxed as theirs.

Income Tax works slightly differently if you’re a parent gifting into a bare trust for your own minor, unmarried child. If the income the trust produces is more than £100 in a tax year, that income is taxed as yours rather than your child’s, under what’s known as the parental settlement rules. This only applies to gifts from a parent while the child is a minor: it doesn’t apply to gifts from grandparents, other relatives, or friends.

Do you need to register a bare trust?

Most bare trusts need to register with HMRC’s Trust Registration Service if they’re an express trust, meaning one you’ve deliberately set up (rather than one that arises automatically). There isn’t a blanket exemption for bare trusts generally.

Some arrangements are excluded. A co-ownership trust, where the people who own a property are both its trustees and its beneficiaries, doesn’t need to register. Since 30 June 2026, a small trust that holds no UK land, has never held more than £10,000 and has income of no more than £5,000 a year may also be exempt.

Our guide to the Trust Registration Service covers registration in more detail, and we can confirm whether your specific bare trust needs to register.

Advantages and disadvantages of a bare trust

A bare trust is worth considering when:

• You want something simple and inexpensive to set up and run, with minimal ongoing administration.
• The beneficiary is, or will be, capable of managing money sensibly once they’re entitled to it.
• You’re comfortable that the beneficiary will get everything once they reach 18 (16 in Scotland), with no scope to change your mind later.

It’s less suitable if you want to protect assets from a beneficiary’s creditors, a future divorce, or their own inexperience with money, or if you want flexibility to change who benefits as circumstances change. A discretionary trust usually suits those situations better.

Bare trust vs other types of trust

If you want more flexibility, for example because you’re not yet sure how a beneficiary’s circumstances will develop, a discretionary trust or life interest trust may suit you better. Our trust solicitors can compare the options with you, including bare, discretionary, life interest and vulnerable beneficiary trusts.

Why choose Osbornes for your bare trust

Our private client team is ranked by Legal 500 and Chambers HNW for trust and estate work. Our trust solicitors set up bare trusts for gifts, joint property arrangements and wider estate planning, and can advise on registration and tax reporting once the trust is up and running.

We’ll talk through what you’re trying to achieve before recommending a bare trust, rather than defaulting to it because it’s the simplest option on paper.

Speak to a trust lawyer today

If you’re thinking about setting up a bare trust, call us on 020 7485 8811 or fill in the contact form below.