Bare Trusts in English Law: What They Are and How They Work

A bare trust is the simplest form of trust recognised in English law. It arises when a trustee holds assets for a single beneficiary who has an absolute and immediate right to both the capital and the income of those assets. The trustee has no active duties beyond holding and transferring the property as the beneficiary directs.

Bare trusts are widely used in estate planning — particularly for holding assets for children until they reach 18 — and they have a distinctive tax treatment that makes them more transparent than other trust structures. This guide explains how they work, when they arise, how they are taxed, and how they compare with discretionary trusts and interest-in-possession trusts.

What is a bare trust?

In a bare trust, the beneficiary is absolutely entitled to the trust property. The trustee is a mere nominee — they hold the legal title, but the beneficial (equitable) ownership belongs entirely to the beneficiary. The trustee must do whatever the beneficiary instructs, within the law.

The classic statement of this principle is the rule in Saunders v Vautier (1841): an adult beneficiary of full capacity who is absolutely entitled to the trust property can call for the assets to be transferred to them immediately and bring the trust to an end. No trustee consent is needed. See our guide on Saunders v Vautier for more detail.

The one situation where a bare trust persists despite this rule is where the beneficiary is a minor (under 18). A minor cannot hold legal title to most assets in English law, so the trustee holds the property until the child reaches 18 and can receive a transfer.

How bare trusts arise in wills and estate planning

Bare trusts arise in several common contexts:

• Gifts to minors in a will. A testator leaves a sum of money or specific asset to a grandchild aged eight. Because the grandchild cannot hold the property directly, the executor or a named trustee holds it on bare trust until the child turns 18. No discretion is exercised — the child will receive the full amount at 18.
• Nominee arrangements. Shares held by a nominee company for the actual beneficial owner. The nominee is a bare trustee; the beneficiary gives all instructions.
• JISA and pension platform custody. Investments held in a Junior ISA or SIPP are often technically held on bare trust for the account holder.
• Lifetime gifts to children. A parent transfers shares to a custodian who holds them for a child until the child reaches adulthood.
• Conveyancing. Solicitors often hold purchase deposits or completion funds on bare trust for their client briefly.

Bare trust vs discretionary trust vs interest-in-possession trust

Tax treatment of a bare trust

Income tax

The income of a bare trust is taxed as if it belongs directly to the beneficiary. The trustee does not pay income tax in their own right — all income is assessed on the beneficiary at their own marginal rate. This “transparent” treatment is one of the most significant practical differences from a discretionary trust, where the trustee pays income tax at the additional rate (45% or 38.1% for dividends) and the beneficiary then claims a tax credit.

Where the beneficiary is a minor and the settlor is a parent, the parental settlement rules apply: income arising from a bare trust created by a parent for their own child is taxed on the parent, not the child, if it exceeds £100 per year. This anti-avoidance rule prevents parents from diverting income to a child’s lower-rate band.

Capital gains tax

Gains arising within a bare trust are taxed on the beneficiary, not the trustee. The beneficiary uses their own annual CGT exemption (currently £3,000) and pays CGT at their own rate. Again, the trust is transparent for CGT purposes.

Inheritance tax

Assets held on bare trust form part of the beneficiary’s estate for inheritance tax purposes — because the beneficiary is absolutely entitled to them. This means:

• No entry charges, 10-year anniversary charges, or exit charges apply (unlike a relevant property trust).
• The trust assets are included in the beneficiary’s IHT calculation on their own death.
• A gift into a bare trust by a living person is a potentially exempt transfer (PET) — it becomes fully exempt if the donor survives seven years.

This is a significant IHT advantage compared with discretionary trusts for straightforward situations where flexibility is not needed.

Using a bare trust in your will for minor beneficiaries

If you want to leave assets to a grandchild or young child without giving them outright control at 18, a bare trust is not the right tool — because the beneficiary can demand the assets the moment they reach 18, regardless of whether you wanted them to wait until 25 or 30.

If you want the trustees to retain control beyond 18, you need a trust for a minor with a deferred vesting age — technically an accumulation and maintenance or contingent trust, where the beneficiary’s entitlement is contingent on reaching (say) 25.

A bare trust is appropriate where you are happy for the child to receive the assets at 18 and simply need a holding mechanism in the meantime — for example, a modest cash gift to a grandchild.

Practical points for bare trusts

• Trust registration. Most bare trusts with UK tax consequences must be registered on HMRC’s Trust Registration Service (TRS), unless a specific exemption applies (e.g. bare trusts used purely as nominees with no tax to pay).
• Self-assessment. The beneficiary (or their parent, if the parental settlement rules apply) must declare income and gains from the trust on their tax return.
• Land Registry. If the trust holds land, the legal title is registered in the trustee’s name; the beneficiary’s interest is noted via a Form A restriction or otherwise, depending on how the property is held.
• Death of the beneficiary. If the beneficiary dies before receiving the assets, the trust property forms part of their estate and passes under their will or the intestacy rules.

Summary

• A bare trust is a simple nominee arrangement where the trustee holds assets for a beneficiary who has an absolute right to both capital and income.
• The main use in estate planning is holding assets for minor beneficiaries who cannot hold property directly until they reach 18.
• Bare trusts are tax-transparent: income and gains are taxed on the beneficiary, and the assets form part of the beneficiary’s estate for IHT.
• No IHT periodic or exit charges apply — making bare trusts simpler and cheaper to run than discretionary trusts for fixed-beneficiary situations.
• If you want control beyond age 18, a contingent trust (vesting at 21 or 25) is more appropriate than a bare trust.