Bare Trusts Explained

A bare trust (also called an absolute trust) is the simplest form of trust in England and Wales. One or more trustees hold an asset on behalf of a named beneficiary who is absolutely entitled to it from the moment the trust is created. The trustees are little more than nominees: they hold legal title, but the entire benefit belongs to the beneficiary. The defining feature — and the catch — is that once the beneficiary turns 18, they can demand everything outright, whatever the person who set it up may have intended.

What is a bare trust?

In any trust, ownership is split into two parts: the legal title (held by the trustees, who manage the asset) and the beneficial interest (the right to actually enjoy it). In a bare trust those two parts point at a single, fixed person. The beneficiary's share is set in stone from day one — it cannot be varied, switched to someone else, or clawed back. That is why it is sometimes called an absolute trust: the entitlement is absolute.

This makes the bare trust the most straightforward arrangement on the spectrum. At the other end sit more flexible structures such as discretionary trusts, where trustees decide who gets what and when. If you are new to the concept altogether, our overview of what a trust is sets out the building blocks first.

How a bare trust works

Three roles are involved. The settlor is the person who puts the asset in. The trustees hold and manage it. The beneficiary owns the benefit. Often a grandparent (settlor) and a parent (trustee) set up a bare trust for a child (beneficiary).

While the beneficiary is a minor, the trustees look after the assets — opening accounts, choosing investments, keeping records — and can apply funds for the child's benefit, such as school fees or other maintenance. Crucially, the trustees cannot use the money for themselves or redirect it to anyone else. Everything they hold is held strictly for the named beneficiary. A bare trust can be created in writing or, in some cases, simply by transferring an asset into an account designated for a specific child, though a short written declaration of trust is always sensible to avoid later disputes.

Common uses: children and grandchildren

Bare trusts are most commonly used to pass money or investments to minor children and grandchildren. A grandparent who wants to help with future university costs, a first car, or a house deposit can place a lump sum or regular contributions into a bare trust, with a parent acting as trustee until the child grows up.

The appeal is twofold: simplicity and tax efficiency (see below). Many families use bare trusts as a clean way to make a meaningful gift to the next generation without the cost and complexity of a fuller trust deed. If your goal is specifically passing assets down a generation, you may also want to read leaving money directly to grandchildren and our wider guide to family trusts, which compares the options.

For inheritance tax, a gift into a bare trust is a potentially exempt transfer (PET). If the settlor survives seven years from the date of the gift, it falls out of their estate entirely. Die within that period and the gift uses up the £325,000 nil-rate band, with taper relief potentially reducing the tax due on gifts made three to seven years before death. This is the same treatment as an outright gift, which is one reason bare trusts are popular for reducing inheritance tax over time. Regular gifts made from genuine surplus income, rather than capital, can also be immediately exempt under the normal expenditure out of income exemption.

How bare trusts are taxed

This is where bare trusts really stand apart. Because the beneficiary is absolutely entitled, the trust is largely transparent for tax: income and gains are treated as the beneficiary's own, taxed at their rates and set against their personal allowances. A child with little other income can therefore often receive trust income and realise gains with little or no tax — a stark contrast to how most trusts are taxed, where trustees pay tax at trust rates and relevant property trusts can face periodic and exit charges.

There is one important trap. Under the parental settlement rule, if a parent gifts assets to their own minor child and the income produced exceeds £100 a year, all of that income is taxed on the parent rather than the child. This rule does not apply to gifts from grandparents, other relatives or friends — which is precisely why bare trusts are so often funded by grandparents. Capital gains, by contrast, remain the child's even on parental gifts.

Many bare trusts also need to be registered on HMRC's Trust Registration Service, though there are several exclusions. Because the detail matters and changes from time to time, this is an area where professional advice is recommended.

The catch: full control at 18

The single most important thing to understand is what happens at adulthood. In England and Wales the age of majority is 18, and at 18 a bare trust beneficiary becomes absolutely entitled to call for the assets. The trustees must hand everything over on request, and the beneficiary can spend it however they wish — there is no power to delay, stagger payments, or impose conditions.

For a modest sum this may be fine. For a substantial pot, handing a teenager unfettered control can be a real concern, and there is nothing the original settlor can do about it once the trust is set up. If you want to keep money out of a young person's hands for longer, or protect it from divorce, creditors or poor decisions, a discretionary trust or another structure aimed at protecting children's inheritance is usually the better fit, even though it costs more and is taxed less kindly.

How to set one up

Setting up a bare trust is comparatively easy. In practice it involves naming the beneficiary, appointing one or more trustees, and recording the arrangement — ideally in a short written declaration of trust — then transferring the asset in. Investment providers and banks often offer designated accounts that operate as bare trusts. Remember that the trust is irrevocable: once made, you cannot change the beneficiary or unwind it.

Even with something this simple, it is worth getting the paperwork right, particularly around who the trustees are and how decisions are recorded. Trustees take on real legal obligations — see trustee duties and responsibilities — and a clear declaration avoids arguments later. Our general guide on how to set up a trust in the UK walks through the wider process.

Is a bare trust right for you?

A bare trust suits you if you want a low-cost, tax-efficient way to give a fixed sum to a specific child or grandchild, you are comfortable that they will receive it absolutely at 18, and you do not need ongoing control. If you need flexibility over who benefits, want to protect assets for the long term, or are dealing with vulnerable beneficiaries, a different structure will serve you better.

Because trust law and tax interact in ways that depend heavily on your circumstances, and because the choice between trust types has lasting consequences, you should treat this guide as a starting point and take tailored professional advice before committing. A qualified, regulated estate planner can confirm whether a bare trust — or something more sophisticated — best meets your goals.