How to Set Up a Trust in the UK

How to set up a trust: the short answer

To set up a trust in England and Wales you follow five practical steps: decide what type of trust you need, choose the people who will fill the three key roles (settlor, trustees and beneficiaries), have a trust deed drafted and signed, transfer the assets into the trustees' names, and register the trust with HMRC's Trust Registration Service. A trust is simply a legal arrangement where one or more trustees hold and manage assets for the benefit of others, under terms you set out. Getting those terms right is what makes a trust effective, so most people work with a qualified estate planner or solicitor. If you are still weighing up whether a trust is the right tool at all, it is worth reading What is a Trust? UK Guide and Trust vs Will: Which Do You Need? first.

Step 1: Choose the right type of trust

The type of trust you choose shapes everything that follows — how the assets are controlled, who benefits and when, and how the trust is taxed. The main options for families in England and Wales are:

• Bare (absolute) trusts — the simplest form, where a beneficiary is absolutely entitled to the assets and income, often used to hold money for a child. See Bare Trusts Explained.
• Discretionary trusts — the trustees decide which of a class of beneficiaries receives what, and when. Flexible, but they fall within the relevant property regime for tax. See Discretionary Trusts Explained.
• Life interest (interest in possession) trusts — one beneficiary has the right to income or to live in a property for life, with the capital passing to others afterwards. See Life Interest Trusts Explained.

Your choice should follow your goal — protecting a child's inheritance, providing for a vulnerable relative, or planning for inheritance tax. There is no single "best" trust; the right one depends entirely on what you are trying to achieve.

Step 2: Decide who the settlor, trustees and beneficiaries are

Every trust has three roles, and you need to decide who fills each before drafting begins.

The settlor is you — the person creating the trust and putting assets into it. The trustees legally own and manage the assets and must act strictly in the beneficiaries' interests and within the law; choose people who are trustworthy, organised and likely to outlive the purpose of the trust. It is sensible to appoint at least two trustees (and you can appoint a professional). The beneficiaries are those who can benefit — named individuals, or a wider class such as "my children and grandchildren".

One person can hold more than one role, but be careful: if the settlor can benefit from the trust, anti-avoidance rules can pull the assets back into their estate for tax. Trustees take on real legal duties, so anyone you ask should understand the commitment — our guide to Trustee Duties and Responsibilities explains what the role involves.

Step 3: Draw up the trust deed

The trust deed (sometimes called the trust instrument or, where a will creates the trust, the will itself) is the document that brings the trust to life. It names the parties, identifies the assets, sets out the trustees' powers and the beneficiaries' entitlements, and records the settlor's wishes. For a discretionary trust, it is also good practice to prepare a non-binding letter of wishes guiding the trustees on how you would like them to exercise their discretion.

The precise wording matters enormously. It dictates how the trust is taxed, how much control the trustees have, and whether the arrangement can later be challenged. This is the stage where DIY templates most often cause problems, because a clause that reads sensibly can have unintended tax or legal effects. Having the deed drafted or reviewed by a qualified professional is the single most valuable thing you can do. The deed must be properly signed and, being a deed, witnessed.

Step 4: Transfer assets into the trust

A trust does nothing until it actually holds assets. Transferring assets — known as settling them — means moving legal ownership from you to the trustees. How you do this depends on the asset:

• Cash and investments are transferred into a trustee bank or investment account.
• Property must be transferred to the trustees and the change registered at HM Land Registry. If there is a mortgage, you will usually need the lender's consent, and Stamp Duty Land Tax (Land Transaction Tax in Wales) may apply.
• Shares are transferred using a stock transfer form and updated in the company's register.

Putting assets into a trust during your lifetime is a transfer for inheritance tax purposes. Many lifetime trusts are relevant property trusts, which can carry a potential 20% entry charge on the amount transferred above your available nil-rate band (currently £325,000), a periodic charge of up to 6% every ten years, and exit charges when capital leaves the trust. Capital gains tax can also arise on assets you transfer in. Before moving anything of significant value — particularly the family home — read Can I Put My House in Trust for My Children? and take advice, because the tax consequences can be significant.

Step 5: Register with the Trust Registration Service

Most trusts must now be registered on HMRC's Trust Registration Service (TRS). This applies to most express trusts whether or not they have any tax to pay, and to any trust that does have a tax liability. There are limited exclusions — for example certain trusts that hold only a life policy paying out on death — but the default position is that you should register.

Registration is done online and requires details of the settlor, trustees, beneficiaries and the trust assets. Deadlines are tight and penalties can apply for late or non-registration, so treat it as a step to complete promptly once the trust exists, not an afterthought. The trustees are responsible for keeping the register accurate and up to date as circumstances change.

Ongoing duties and tax

Setting up the trust is the beginning, not the end. Trustees must manage the assets prudently, keep proper records, act in the beneficiaries' best interests and deal with the trust's tax affairs. Trust income is taxed at trust rates, capital gains tax applies to disposals, and relevant property trusts face the periodic and exit charges mentioned above. Many trusts will need to file tax returns and trust accounts. For a fuller picture of the charges involved, see How Are Trusts Taxed in the UK? and our wider Inheritance Tax UK: Complete Guide. Because these duties are ongoing and the penalties for getting them wrong can be real, many trustees engage an accountant or estate planner to help.

When to get professional advice

A trust is a powerful tool for protecting wealth, providing for loved ones and planning for inheritance tax — but it is also a long-term legal and tax commitment that can be costly to unwind if it is set up incorrectly. Trusts interact with inheritance tax, capital gains tax, Stamp Duty Land Tax and the relevant property regime in ways that are easy to misjudge. For anything beyond the very simplest arrangement, you should take advice from a qualified estate planner or solicitor before you commit. A trained adviser will help you choose the right type of trust, draft a watertight deed, transfer assets in the most tax-efficient way and register the trust correctly — giving you confidence that what you have set up will actually do what you intend.