Living Trust UK: Do They Exist and What Are the UK Alternatives?
Updated: 16 May 2026 • Reading time: 7 min
If you have come across the term “living trust” — perhaps through American financial advice, or from friends or family who have emigrated from the US — you may be wondering whether a living trust is something you can set up in the UK. The short answer is: not in the same form. English law has a rich trust tradition, but it does not include the US-style revocable living trust, and the tax and legal frameworks are fundamentally different.
What Is a US Living Trust?
In the United States, a revocable living trust (also called an inter vivos trust) is a legal arrangement in which a person (the grantor) transfers assets into a trust during their lifetime, typically naming themselves as trustee and beneficiary during life. On death, the assets pass to successor trustees and then to named beneficiaries — bypassing the US probate process entirely.
Key features of the US living trust:
- Revocable during the grantor’s lifetime — can be changed or cancelled at any time
- The grantor retains full control and beneficial ownership during life
- Assets pass to beneficiaries on death without probate
- Generally estate-tax neutral on creation (unlike UK trusts)
- Does not protect assets from creditors during the grantor’s lifetime
Why a US Living Trust Does Not Translate to England
Several features of English law make the US living trust approach unworkable in the same form:
- IHT entry charges: Transferring assets above £325,000 into an English discretionary trust triggers an immediate 20% IHT charge on the excess. In the US, a revocable living trust is generally transparent for gift/estate tax purposes.
- No true revocability: English trust law does not recognise a settlor retaining a beneficial interest without that trust being a “settlor-interested” trust — which has adverse income tax and CGT consequences, and does not achieve the transfer of beneficial ownership sought.
- Probate is different: English probate is a relatively straightforward court process (compared to the US, where probate can be slow and expensive in some states). The probate-avoidance motivation for a US living trust is less compelling in England and Wales.
- Relevant property regime: English discretionary trusts face 10-year periodic charges (up to 6% of fund value) and exit charges — an ongoing tax cost that US living trusts do not carry.
UK Alternatives That Achieve Similar Goals
1. Testamentary (Will) Trusts
The most commonly used trust mechanism in English estate planning is the testamentary trust — a trust created by a will that takes effect on death. A will trust can hold assets for named beneficiaries (for example, children until they reach 25, or a surviving spouse for life), be administered by trustees with full discretion, and be drafted to minimise IHT. Unlike a lifetime trust, a will trust does not incur an IHT entry charge — assets pass into it as part of the estate administration.
2. Joint Ownership and Nominations
Several mechanisms allow assets to pass outside a will (and thus without probate):
- Joint tenancy: property passes automatically to the surviving joint owner by right of survivorship
- Pension nominations: pension funds do not pass under the will — they are paid by trustees to nominated beneficiaries
- Life insurance in trust: policies written in trust pay out directly to trust beneficiaries without forming part of the estate
- Bank accounts with survivorship: some joint accounts pass automatically to the survivor
3. Lifetime Gifts
Outright gifts of assets during your lifetime remove those assets from your IHT estate — provided you survive seven years (or three years for taper relief). Unlike a US living trust, you give up control permanently. However, for assets you do not need and which you are comfortable transferring, lifetime gifting can be highly effective for IHT reduction.
Types of Trust You Can Create in Your Will
| Trust Type | Best For | IHT charges |
|---|---|---|
| Discretionary trust | Flexibility; vulnerable beneficiaries; multiple generations | 10-year + exit charges |
| Life interest trust | Surviving spouse + children; second marriages | Forms part of life tenant’s estate |
| Nil-rate band trust | IHT planning on first death | Possible 10-year charges on excess |
| Bereaved minor trust | Children under 18 who lose a parent | No 10-year or exit charges |
| Disabled person’s trust | Disabled beneficiaries (s.89 IHTA) | No 10-year or exit charges |
Offshore Trusts: A Word of Caution
UK-domiciled residents who set up offshore trusts (for example, in Jersey, Guernsey, or the Cayman Islands) hoping to replicate US living trust advantages will typically find that HMRC attributes the income and gains of the offshore trust to the UK-resident settlor under the Transfer of Assets Abroad rules and the settlor-interested trust rules. For UK-domiciled individuals, offshore trusts generally do not achieve IHT savings and carry significant compliance obligations. Specialist advice from a qualified tax barrister or chartered tax adviser is essential before considering offshore structures.
Frequently Asked Questions
Does England and Wales have living trusts?
England and Wales does not have a direct equivalent of the US 'revocable living trust'. The concept — a trust created during your lifetime into which you transfer your assets, which passes to beneficiaries on death without going through probate — does not translate directly to English law. English law has inter vivos (lifetime) trusts, but they work differently from US living trusts: an English trust is not revocable once created (absent express power), and assets transferred into trust are generally subject to IHT entry charges if above the nil-rate band. The tax and legal regime is fundamentally different.
What is the UK equivalent of a US living trust for avoiding probate?
In England and Wales, the main tools that avoid probate without a living trust are: (1) joint ownership — property held as joint tenants passes by right of survivorship, not under a will; (2) named beneficiary nominations — pension funds, life insurance in trust, and some bank accounts can pass directly to named beneficiaries outside the estate; (3) gifts during lifetime — giving assets away before death removes them from the estate entirely (subject to IHT gifting rules); (4) testamentary trusts — created by will, these do not avoid probate but allow assets to be administered flexibly after death by trustees. Scotland has the same options.
Can I create an inter vivos trust in the UK and transfer assets into it?
Yes — English law permits the creation of lifetime (inter vivos) trusts, and assets can be transferred into them. However, unlike a US revocable living trust, an English trust typically triggers IHT consequences at creation: transfers above the settlor's nil-rate band (£325,000 in 2026) into a discretionary trust attract an immediate 20% IHT entry charge on the excess. The trust then faces 10-year periodic charges and exit charges. This makes large-scale asset transfer into a lifetime discretionary trust expensive for IHT purposes — very different from the US position where most living trusts are tax-neutral on creation.
Why do wills and will trusts achieve similar goals in the UK?
In England and Wales, a well-drafted will with embedded trusts (will trusts or testamentary trusts) can achieve most of the goals a US living trust is designed for. A discretionary will trust can hold assets for multiple beneficiaries, provide asset protection, and allow flexible distribution according to circumstances at the time of need. A life interest trust can provide for a surviving spouse while protecting capital for children. Unlike a US living trust, a will trust does not avoid probate — but UK probate for straightforward estates is relatively quick (4–8 weeks for simple estates) and inexpensive, so the probate-avoidance benefit of a US living trust matters less in England.
Are offshore living trusts effective for UK residents?
UK residents who set up offshore trusts — for example, in Jersey, Guernsey, or the Isle of Man — face the settlor-interested trust rules and the Transfer of Assets Abroad rules in UK tax law. HMRC can attribute the income and gains of an offshore trust to the UK-resident settlor, defeating the tax advantages. For UK-domiciled individuals, offshore trusts do not provide the IHT advantages that a US living trust provides for US citizens (where the estate tax treatment differs). Offshore trust planning requires specialist tax advice and is generally only beneficial for non-domiciled individuals or very specific planning objectives.
What types of trust can I create in my will in England and Wales?
A will can create several types of testamentary trust: (1) Discretionary trust — trustees hold assets and have full discretion over who benefits and when; useful for flexibility and protecting vulnerable beneficiaries; (2) Life interest (interest in possession) trust — a named beneficiary receives income during their lifetime; capital passes to remaindermen on their death; commonly used in second marriage planning; (3) Trust for a bereaved minor — a statutory trust for children under 18 who have lost a parent; no 10-year charges; (4) Disabled person's trust (section 89 IHTA 1984) — for disabled beneficiaries; favourable IHT treatment; (5) Nil-rate band discretionary trust — uses the testator's nil-rate band to shelter assets from IHT on the surviving spouse's death.
UK Estate Planning That Works
A well-drafted English will with the right trust provisions can achieve many of the same goals as a US living trust — protecting beneficiaries, reducing IHT, and ensuring your assets go where you intend. WillSafe helps you start with the foundations.
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