What is a Bare Trust?
There are a number of different types of trust, and this variety can be overwhelming. Many people have been told that the establishment of a trust is the best option for them; however, deciding on the correct type to use in certain circumstances can be difficult. A bare trust, also known as a simple trust, is one of the most basic and easy to understand forms of trust.
Under a bare trust arrangement, as with any trust, assets are transferred into trust by the settlor. At this point the settlor gives up the legal title to the assets; they cease to be their property, and instead become the property of the trust.
Trustees then take on the responsibility for the management of these assets, which must be dealt with in such a way as to produce the maximum benefit for the intended beneficiaries. The terms of the trust will determine how much discretion is given to the trustees.
Trustee Rights
Bare trusts leave no room for trustee discretion. When assets are transferred into these trusts, the trustees have no practical control over them; their control is in title only. Furthermore, the trustees have no discretionary power over the proceeds of the trust – they may not withhold income or capital generated by or contained within the trust.Bare trusts are particularly useful for parents or grandparents who wish to pass on assets to their children or grandchildren. The named beneficiary has what is known as ‘absolute entitlement’ to the assets that are placed in trust, but they will be held in the name of the trustee until the child reaches the age of 18. At this point the beneficiary will be immediately able to call on the assets; the trustees will have no discretion over whether or not they should receive them.
Tax Treatment
An attractive aspect of bare trusts is their tax treatment. As the beneficiary has absolute entitlement to the assets in trust, and the legal title was given up by the settlor when they transferred the assets, there is no tax implication for the settlor. For tax purposes, the assets are treated as the property of the beneficiary. If they are a child they are unlikely to be earning and will therefore not be using up their annual tax exemptions. As such, a bare trust offers a highly tax-efficient method of ring-fencing assets for future generations.There are, however, potential inheritance tax (IHT) implications. Assets placed in trust are treated as potentially exempt transfers, meaning that they are likely to be subject to IHT if the settlor should die within seven years of the transfer. This is only the case, however, if the total transfers made by that individual within that year total more than £3,000; gifts made below this annual limit are exempt.
Many solicitors will insist that professional help is required to establish a bare trust. In reality, however, many building societies and other savings organisations will be able to provide the forms that you need. These should be filled out and forwarded to your local Tax Office for stamping.
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I MADE A BARE TRUST IN FAVOUR OF MY MINOR CHILDREN. WE INVESTED IN OFFSHORE ROLL UP FUNDS THAT DO NOT HAVE REPORTING STATUS AND THUS ANY 'GAINS' ARE LIABLE TO INCOME TAX.
CAPITAL GAINS MADE BY THE BARE TRUST ARE ASSESSABLE ON MY MINOR CHILDREN.
INCOME CONTINUES TO BE TAXED ON MYSELF AS THE PARENT SETTLOR WHILST THE BENEFICIARIES ARE SINGLE AND UNDER 18 YEARS OF AGE.
AS OFFSHORE INCOME GAINS ARE CAPITAL GAINS BUT TREATED AS INCOME FOR TAX PURPOSES ARE THEY TAXABLE ON ME AS THE SETTLOR
MANY THANKS
LOSTINSPACE - 10-Oct-19 @ 11:06 AM
My Brother has a property trust fund and also a trust fund with money in. I am his Sister and his full time Carer....I have been doing this for the last 4 years 24/7. My Brother has named me as the only beneficiary in his will that he made over 4 years ago but has now decided he wants to sign the deeds to the property trust over to me. I am a trustee as well as having lasting power of attorney over all his financial affairs. My Brother has full mental capacity so we were wondering if signing the deeds over is worth discussing with his Solicitor or if it will be a waste of time?
BLISSY - 4-Jun-19 @ 11:53 PM
My Father-in-law bought a property for my daughter and had it registered in her name.He has since died but left a letter stating that he wanted her to have it for the love and kindness which she showed him .She has now gone to sell the property but the conveyancer acting for her said they cannot proceed with the sale as she was only 10 years old when he bought it for her and therefore it should not legally have been registered in her name.
She has a receipt for the peuchase from the solicitor who acted on the sale and a letter also from themsaying they were forwarding her the land certificate
What does she need to do to allow her to continue with the sale.
Nuts - 27-Nov-18 @ 3:35 PM
I set up a bare trust for my young daughter and bought a buy to let property. My husband and I are both trustees of the bare trust.According to the deeds the trust is the legal owner of the property. The income from the property is spent on my daughter's school fees. We now want to terminate the trust as we have concerns about our daughter inheriting a property and large bank account at the age of 18.
How can we do terminate the trust without selling the property.
Professor Trelawny - 23-Oct-18 @ 4:59 PM
I live in a small block of 4 Flats which is a registered as a Freehold Company. Each flat owner is a director of the Company except 1 Tenant, who is a "Life Trust Interest" will not co-operate with the the Freehold Management and has caused damage to the building. The "Bare Trustees" say they are not responsible for the Tenant, ever though they are listed as the proprietors on the Land Registry entry.
What I need to know is:- Can a "Life Trust Interest" tenant be imposed on to a Limited Company with nobody responsible for her actions. Can the "Bare Trustees be held responsible, and if not, who is responsibly for the day to day administration of the flat. It's like taking away 25% of our Company and saying that nobody is responsibly.
Budsalt - 23-Aug-18 @ 3:40 PM
Is this site still active? I put a question in on 13th August and then nothing.
Thanks
Bumpy - 17-Aug-18 @ 12:41 PM
A small plot of land of negligible value (say £1000) is held in Bare Trust with a standard Trustee and Sole Beneficiary.
If a third party makes a financial demand on that land of say £50,000 (for instance a Chancel Repair Liability by the Church), who is responsible for handling that demand.
Is it the Trustee or is it the Sole Beneficiary
Most importantly, is the maximum they can claim just the value of the land or can they make additional demands on the Trustee or Sole Beneficiary?
Thanks
Bumpy - 13-Aug-18 @ 10:32 AM
toots - Your Question:
This is a question. I am one of 203 beneficiaries of a bare trust. We have only just been told that it is a bare trust. The Trustees because without disclosing it to the beneficiaries, they dedicated a piece of trust land to the local council for road widening for no consideration. And gave them the right to demand the Title for no consideration. Under that dedication, the council is "vested" with the top two spadefuls of soil of the piece of land.(all they need for road). In the meantime, the Trustees have continued to demand from the beneficiaries the same levy which is intended for the upkeep of the said piece of land (plus others).Before I learnt that it was a bare trust (14 December 2017), I applied to have the Deed of Dedication set aside. The Trustees entered a Defence.If this is a bare trust, have the Trustees the legal right and ability (without any rights given them in the Trust Deed) to enter a Defence without directions from the beneficiaries (or an application for directions from the Court) ? TAlso, there is no indemnity in the Trust Deeds and they have - again without telling the beneficiaries - extended the know Public Liability INsurance to include an indemnity of £100.00 for themselves against breach of trust etc. (Breach of s.34?)Your help would be terrific - I am acting as Litigant in Person.toots
Our Response:
We can't help on individual cases like this as we really don't have enough information. If there are indeed 203 beneficiaries of the trust, it might be worth joining together and paying a legal professional to help you.
EstatesOrTrusts - 15-Jan-18 @ 12:27 PM
This is a question.I am one of 203 beneficiaries of a bare trust.We have only just been told that it is a bare trust.The Trustees because without disclosing it to the beneficiaries, they dedicated a piece of trust land to the local council for road widening for no consideration.And gave them the right to demand the Title for no consideration.Under that dedication, the council is "vested" with the top two spadefuls of soil of the piece of land.(all they need for road).In the meantime, the Trustees have continued to demand from the beneficiaries the same levy which is intended for the upkeep of the said piece of land (plus others).
Before I learnt that it was a bare trust (14 December 2017), I applied to have the Deed of Dedication set aside.The Trustees entered a Defence.
If this is a bare trust, have the Trustees the legal right and ability (without any rights given them in the Trust Deed) to enter a Defence without directions from the beneficiaries (or an application for directions from the Court) ?T
Also, there is no indemnity in the Trust Deeds and they have - again without telling the beneficiaries - extended the know Public Liability INsurance to include an indemnity of £100.00 for themselves against breach of trust etc.(Breach of s.34?)
Your help would be terrific - I am acting as Litigant in Person.
toots
toots - 12-Jan-18 @ 2:28 PM
Old Bird 57 - Your Question:
My mother bought a property and apparently put it in a bare trust for my daughter as she was 16. My daughter is now 27 but my mother recently sold the property and my daughter has never received a penny. Is this legal? How can we find out if the property was definitely in a bare trust for her and also is she entitled to anything
Our Response:
Can't you just ask her? Who were the other trustees? If there is no evidence of the trust it's going to be really difficult to do anything about this. Perhaps she intended to create a trust and never did?
EstatesOrTrusts - 1-Dec-17 @ 10:26 AM
My mother bought a property and apparently put it in a bare trust for my daughter as she was 16.My daughter is now 27 but my mother recently sold the property and my daughter has never received a penny.Is this legal?How can we find out if the property was definitely in a bare trust for her and also is she entitled to anything
Old Bird 57 - 29-Nov-17 @ 2:37 PM
Do ,i need solictor to set up trust for IHT purposes .after my nil rate band allownces ,if i had etc amount ,which i would like to give it to my childern with out paying any tax,what is the best way to do it legally .
sheeli - 3-Sep-17 @ 4:34 PM
I'm a landlord with10 propertys farm land and my own home I have 3children and grandchildrenI want to set up some kind of trust to protest my propertys from IHT .
Partygirl21 - 19-Apr-17 @ 1:19 AM
@Bigtree8 - that's a good idea.
EstatesOrTrusts - 17-Sep-14 @ 2:07 PM
I am not interested in saving I h tand do not want to lose control or access to my money ! However I would like money to be available to my executors to enable them to pay tax due .ihave money in a investment bondis there a trust I can wrap this in that will fit my purpose
Bigtree8 - 15-Sep-14 @ 10:37 PM
I am trustee for my children who are under 18 the trust is called a bare trust i what to know what can i spend the money on
parent - 5-Feb-13 @ 9:36 PM
Can the allocation of monies,to beneficiaries of a "Bare Trust", be changed if one of the beneficiaries dies before the Trust is implemented by the death of the Settlor
e.g Mr Settlor has made a Will which allocates equal shares of the Trust to each of three beneficiaries. One of the Beneficiaries has died and the Settlor is still living. Can the Settlor change his Will and re-allocate the monies to the remaining two beneficiaries? The exact amount of money payable on the death of the Settlor cannot be determined before the death of the Settlor as the trust is used to pay for the Settlors care in a Residential Home.
Thanks
Crusher - 31-Jan-13 @ 3:44 PM
are trusts laible for IHT or CGT
what conditions apply to setting up a trust and how and where can i get more info
Many thanks
samad - 22-Jan-13 @ 5:40 PM
I have split my assests with my wife but both of us remain liable to to significant IHT.
All our investments are in private property and we need to consider all optins to minimise tax payments now, to minimise/eradicateIHT later.
I think I need a specialist tax advisor! How do I find a recognised reputable one?
Regards,
MJ
MJ - 4-Jul-12 @ 10:14 AM
I note that you state,"An attractive aspect of bare trusts is their tax treatment. As the beneficiary has absolute entitlement to the assets in trust, and the legal title was given up by the settlor when they transferred the assets, there is no tax implication for the settlor....."
My understanding is that when a property (say a rental property) is put into a trust, it counts as a disposal of an asset and therfroe is subject to capital gains tax.
I would be gratful for your comments on this.
K - 25-Jun-12 @ 3:09 PM
If sarah declares herself trustee of her own shares is this a bare trust, also what statutory formalities are required...?
J - 2-May-12 @ 6:47 PM
If a bare trust is in place and it states it's irrevocable can it be revoked?
dalek - 13-Mar-11 @ 1:12 PM
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