Using Trusts in Your Will: A Practical Introduction

I think trusts have an image problem. People hear the word and picture offshore accounts, family dynasties, maybe a marble-floored solicitor's office. The reality is far more boring and far more useful: a trust is just one person looking after money or property for somebody else, following rules you've written down.

Here's how I explain it. Imagine you want to leave fifty thousand pounds to a grandchild who's ten. You wouldn't hand that money to a child, would you? Nobody would. So you ask someone you rely on, maybe your daughter, to hold onto it and pass it along when the grandchild turns twenty-five. Write that arrangement into your Will with the right legal wording and congratulations, you've got a trust.

You set the rules. How the money gets invested, when it's released, what it can be spent on in the meantime. You can name backup beneficiaries if circumstances change. The trust wording in your Will spells all of this out and whoever runs it is legally bound to follow your instructions.

I've lost count of how many people tell me trusts are only for the wealthy. They're not. Own a house? Have kids? You might genuinely benefit from one.

Once you understand three roles, trusts stop being mysterious. Honestly, it clicks almost immediately.

The settlor is the person who creates the trust. In a Will trust, that's you. You decide what goes in, who benefits, and what rules apply. Once you die and the Will takes effect, your part is finished. Your written instructions run everything from that point on.

The trustees are the people you choose to manage things day to day. They hold the assets, make investment decisions, and distribute money or property according to your rules. The legal term is "fiduciary duty," which really just means one thing: beneficiaries first, themselves never. I cannot overstate how important it is to pick the right people here. It's a big job. We'll come back to it.

The beneficiaries are who the trust exists for. They might receive regular income, live in a property the trust owns, or get a lump sum at a future date. You can have one beneficiary or several. They don't all have to receive the same deal either. One person could receive income for life while another inherits the capital only after that person dies.

These roles are distinct, even though one person can sometimes fill more than one. A trustee can also be a beneficiary, for instance. But that kind of overlap needs careful thought so conflicts of interest don't quietly creep in.

Most Wills are simple. "I leave everything to my wife." Or "split my savings equally between the three kids." For plenty of families that does the job perfectly, and I'd never suggest adding complexity for the sake of it. Trusts tend to turn up when a straightforward gift can't quite get you where you want to be.

Keeping assets safe. The moment you leave someone money outright, it's theirs. If they later go through a divorce, face bankruptcy, or just burn through cash, that inheritance is at risk. I've watched it happen. A trust can fence those assets off so they stay protected while the person still gets the benefit.

Looking after someone who can't manage money alone. A beneficiary with a learning disability, a serious mental health condition, or an addiction might struggle with a lump sum landing in their lap. A trust lets you provide for what they need without putting them in direct control. Here's the thing people miss though: a direct inheritance can also wipe out their means-tested state benefits. A properly set up trust avoids that.

Setting the timing yourself. Maybe you want your children to inherit, but not at eighteen when they've barely left school. A trust lets you pick the age. Twenty-five, thirty, whatever sits right with you.

Tax planning. In certain situations trusts can bring down the inheritance tax bill or manage your beneficiaries' tax position more efficiently. This is tricky ground though and professional advice is a must.

Blended families. Got children from a previous relationship and a current partner? I'd argue this is where trusts earn their keep most. A trust can make sure your partner is comfortable for life while guaranteeing your kids eventually receive your share. Without one, there's a genuine risk your assets slowly drift to your partner's side of the family instead.

I'll be honest, bare trusts barely feel like trusts at all. They're the training wheels. The beneficiary has an absolute right to everything in it, capital and income, and once they turn eighteen (sixteen in Scotland) they can demand the lot. The trustee hands it over. No discretion, no conditions, no clever structuring. Just a holding arrangement until the beneficiary is old enough.

When they earn their keep:

Children. That's really the only case where I think bare trusts pull their weight. If you leave money to a grandchild in your Will and they're under eighteen when you die, the law won't let them receive it directly. A bare trust fills the gap, holding the money until the beneficiary turns eighteen. For that specific job, it works perfectly.

My honest view:

They solve a narrow problem. If what you actually want is control over when or how your money gets used, a bare trust is the wrong tool because you cannot attach conditions. Once the beneficiary reaches eighteen, the money is theirs whether they're sensible enough to handle it or not. I've spoken with families who assumed their bare trust would keep funds locked away until twenty-five. It won't. If you want that level of control, skip past bare trusts entirely and look at a discretionary trust.

Tax position:

Income and gains are treated as belonging to the beneficiary for tax purposes, which can work out well if they're earning little or nothing. No separate trust tax wrapper applies. Watch out for the parental settlement rules though. When a parent sets up a bare trust for their own minor child and the income tops one hundred pounds a year, HMRC taxes that income as the parent's, not the child's. Grandparents don't have this problem, which is one reason bare trusts crop up far more often in grandparent-to-grandchild arrangements.

If I had to pick one trust type that earns its keep more often than any other, it's this one. A life interest trust, also called an "interest in possession trust," gives one person the right to use an asset or collect income from it for their lifetime. After they die, whatever remains passes to someone else you've named.

The textbook scenario, and why I rate these so highly:

David and Sarah are married. David has two children from his first marriage. He wants Sarah to be comfortable after he's gone, able to stay in the family home with enough income to live on, but he also wants his children to get his share eventually.

Without a trust, David could leave everything to Sarah. But what happens if Sarah remarries? Needs long-term care? Changes her own Will years later? David's children could end up with nothing. That's exactly what a life interest trust sorts out. David's share of the home and other assets goes into the trust. Sarah gets to live in the house and draw income from the investments for the rest of her life. When Sarah dies, what's left passes to David's children.

Why I think blended families should default to this:

I've seen too many cases where good intentions fall apart without this structure. The surviving partner isn't trying to cut anyone out but life moves on. They meet someone new. They update their Will. They downsize the house and spend the proceeds. Twenty years later the first partner's children discover there's nothing left for them. A life interest trust prevents that from happening by accident. It's not about distrust. It's about acknowledging that circumstances change and people change with them.

Things to watch for:

The "life tenant" (Sarah in the example) normally can't sell or give away the trust property. She benefits from it but doesn't own it. The trustees manage the asset and try to keep both the life tenant and the eventual beneficiaries happy, which is a balancing act that can create real friction, particularly around property maintenance and whether to sell. You want calm, fair-minded trustees for this one. People who can sit in a room with both sides and find the sensible middle ground.

I want to be straight about discretionary trusts upfront. They're the Swiss Army knife of estate planning. They're also the most expensive to run, the most work for your trustees, and the most over-recommended by advisers who charge by the hour. Whether one is right for you depends entirely on your actual circumstances.

Here's how they work. You name a group of possible beneficiaries, maybe "my children and grandchildren," and the trustees use their own judgement to decide who gets what, how much, and when. You don't lock anything down. The trustees call every shot.

Where they genuinely shine:

Families with a disabled or vulnerable beneficiary. I think discretionary trusts are not just worth it here but essential. Certain state benefits, think Universal Credit, Personal Independence Payment, and local authority care funding, depend on how much capital a person holds. A direct inheritance could push them over the limit and strip that support away overnight. A discretionary trust sits outside the beneficiary's personal estate. The trustees can spend money on them directly, paying for holidays, specialist equipment, home improvements, extras, without it counting against their benefits threshold. When built specifically for this purpose people sometimes call it a "disabled person's trust." For these families the running costs are trivial compared to the benefits they preserve.

They also work well when life is genuinely unpredictable. One child might get seriously ill. Another might marry someone drowning in debt. A grandchild might need help at exactly the wrong moment. The trust lets your trustees react to things you couldn't have pictured when you wrote your Will.

Where I think people over-complicate things:

If your family situation is stable, your beneficiaries are capable adults, and you have a clear idea of who should get what, you probably don't need the overhead. Discretionary trusts demand proper record-keeping. Trustees must file annual tax returns with HMRC. The trust income tax rate is 45% on most non-dividend income, which is brutal. There are ten-year anniversary charges as well as exit charges when capital comes out. On top of all that you're handing real power to your trustees, which only works if you trust them completely.

A clear letter of wishes helps. It's a non-binding document where you explain your thinking and preferences, giving your trustees direction without tying their hands legally. But be realistic. You're asking people to make judgement calls with your money for years or decades after you've gone.

For most people their home is the biggest thing they own and the asset they care most about protecting. I find this is where conversations about trusts get most emotional. A property trust isn't technically a separate legal category. It's really just a trust that happens to hold a house. The point is to make sure the home ends up with the right people even if life throws a curveball.

The care fees worry:

This is the one that keeps older homeowners up at night. Local authorities carry out a financial assessment when somebody needs residential care and the family home can be counted depending on the circumstances. If your estate sits above the upper capital limit (twenty-three thousand two hundred and fifty pounds in England right now), you may have to fund your own care.

But here's an important reality check. A property trust doesn't make the home invisible to the council. There are "deliberate deprivation of assets" rules, meaning that moving your home into a trust purely to dodge care fees can be challenged and even reversed. Where a trust is set up for genuine reasons though, like protecting your share of the property for children in a blended family, it can offer real protection. Only the share belonging to the person who needs care gets assessed, not the share already held in trust for others.

How it actually works:

Say a married couple owns a home worth four hundred thousand pounds as "tenants in common," meaning each owns a defined half. That's different from "joint tenants" where the whole property passes automatically to the survivor. When the first partner dies, their half goes into a trust. The surviving partner carries on living there since the trust gives them that right. But the deceased partner's half is ring-fenced for the children. If the surviving partner later needs residential care, only their own half of the property value gets counted in the assessment.

A word of caution:

I always tell people the rules around property, trusts, and care funding are detailed and they shift over time. Something that works today might not hold up five years from now. Get proper legal advice before setting up any trust that involves the family home.

Scenario 1: Stopping a young person from getting too much too fast.

I think Margaret's situation is one of the most relatable. She's seventy-two. She wants to leave one hundred thousand pounds to her grandson Callum, who's fourteen. She loves him dearly but she's also realistic. Handing an eighteen-year-old a six-figure sum? That rarely ends well. So Margaret puts a discretionary trust in her Will where the trustees can pay for Callum's education, his driving lessons, and help with a deposit on his first flat, then release the rest when he turns thirty. If he turns out sensible with money the trustees can release funds sooner. If not, they hold back.

Scenario 2: Caring for a disabled adult child.

This one really matters to me. Robert and Helen have a daughter called Emma who has a severe learning disability and receives local authority support. Leaving money to Emma directly would knock out her means-tested benefits, which is the last thing they want. So they set up a discretionary trust in their Wills naming Emma as the primary beneficiary. The trustees can use trust money to make Emma's life better. Sensory equipment. Outings. Extra personal care. Adapted holidays. None of it touches her state support. Robert and Helen also write a detailed letter of wishes covering Emma's daily routines, the things she enjoys, and the small details that make her days happier.

Scenario 3: Second marriage with children on both sides.

John married Patricia five years ago. He's got two grown-up children from his first marriage. Patricia has one. Together they own a house worth five hundred thousand pounds. John's Will puts his half into a life interest trust. Patricia can live in the house for the rest of her life. When she dies, John's half passes to his two children. Patricia's own Will handles her half however she chooses. Both sets of children are looked after and Patricia isn't left without a home.

I won't pretend trusts and tax is light reading. It could fill an entire bookshelf. But there are a handful of big points worth knowing before you sit down with a professional.

Inheritance tax (IHT) when the trust is created. Assets going into certain trusts on death may eat into the nil-rate band, which is three hundred and twenty-five thousand pounds per person at the moment. Anything above that gets taxed at 40%. Life interest trusts set up on death usually qualify for the spouse exemption, so if the life tenant is a husband, wife, or civil partner there's no IHT bill at that stage. Discretionary trusts don't get that exemption. That makes the nil-rate band position far more pressing.

Periodic and exit charges. Discretionary trusts get hit with a "ten-year anniversary charge," up to 6% of the trust value above the nil-rate band, plus "exit charges" when capital comes out. The formula is, honestly, baffling without professional help. They're usually smaller than people fear though. Plan for them without losing sleep.

Income tax. Trustees of discretionary trusts pay income tax at the trust rate: 45% on most income and 39.35% on dividends as of 2025/26. Bare trusts and life interest trusts work differently. Income from those is generally treated as belonging to the beneficiary, not the trust itself.

Capital gains tax (CGT). Trusts get their own CGT allowance, which is a lot smaller than the personal one. Gains above it are taxed at the trust rate, currently 24% for residential property and 20% for other assets.

So what does all this actually mean? Trusts are not automatically a tax win. Sometimes they create a bigger tax bill than a straight gift would have done. The real value, for most families, is the control and protection rather than the tax savings. I'd always say get proper tax advice before building trusts into your Will for tax reasons alone.

Trusts add cost, paperwork, and legal machinery to a Will that might not need it. I never recommend them as a default.

When do they earn their place? The strongest case, in my experience, is blended families. If you've got children from an earlier relationship and a current partner, the life interest trust was basically invented for you. Same goes if a beneficiary is a child and you want a say in when they actually get the money. Or if someone in the family has a disability that makes managing money unrealistic. Or where a direct inheritance would wipe out benefits they depend on.

Property protection is another one worth looking at seriously, especially if you're worried about care fees eating into the house or about your share being redirected after you die. And if your estate is large enough that inheritance tax is a real concern rather than a theoretical one, a trust might fit into a wider strategy. I've also seen families use them as a safety net where there's a genuine worry about a beneficiary's marriage going south, or someone who just cannot hold onto money.

On the other hand? A simple Will probably does the job if your family is fairly straightforward. Married couple, shared children, no previous relationships, everyone's a capable adult, and the estate sits inside the inheritance tax limits. You're not losing sleep over how anyone will spend the money.

There's nothing wrong with keeping it simple. A well-written straightforward Will covers the vast majority of families perfectly well. Think of trusts as a tool you reach for when a specific problem calls for it. Not a default upgrade.

I think most people underestimate what being a trustee actually involves. It's not just holding onto money. Trustees manage assets, make investment calls, file tax returns, keep accounts, balance the competing needs of different beneficiaries, and face personal liability if they get it wrong. Picking the right people is perhaps the single most consequential decision in the whole process.

What should you look for?

Honesty goes without saying. Financial common sense matters too, not necessarily expertise but the sort of person who can handle money sensibly and knows when to pick up the phone and ask a professional. Patience counts for a lot because trusts can run for decades. And someone who can stay neutral when beneficiaries are pulling in different directions? Worth their weight in gold.

How many trustees?

Two is the practical minimum for property trusts because the law requires at least two trustees to give a valid receipt when land is sold. For other trusts one is technically enough but two gives you accountability and a backup if one drops out. You can appoint up to four trustees for trusts holding land.

Family or professional?

Family trustees know the beneficiaries personally. They know Emma likes swimming on Tuesdays and that Callum is hopeless with money. Professional trustees, whether solicitors, accountants, or trust companies, bring expertise, neutrality, and staying power. They won't move abroad, fall out with the family, or get stuck on the annual tax return. Plenty of families go with a mix and in my view that's often the best of both worlds.

Professionals charge though. Usually a percentage of the trust value each year or an hourly rate. Those fees come out of the trust fund, meaning less reaches the beneficiaries over time. Factor that in.

Replacement trustees:

People retire, move away, lose capacity, die. Your Will or trust deed should set out a clear process for appointing new trustees when any of that happens. Without one you could end up in court, spending money and burning time nobody can afford while the trust sits idle.

A letter of wishes:

I consider this the single most underrated document in estate planning. Not legally binding. But it tells your trustees what you were thinking: which beneficiaries come first, what spending you'd approve of, how you'd like investments handled, personal details about the people they're looking after. Most trustees take them very seriously. You can update yours whenever you want without touching the Will itself. Revisit it every few years as your circumstances shift.

Trusts sit right where property law, tax law, family law, and benefits law all crash into each other. The rules are specific. The penalties for mistakes are real. Problems often don't surface until years after the trust was created, long after the person who set it up is gone.

Keystone Estate Planning is not a law firm. Our online Will-writing service helps families put together straightforward Wills with clear guidance at every step. If your Will needs trusts I'd strongly recommend talking to a solicitor who specialises in trust and estate work. They can draft the trust provisions properly, advise on the tax position for your specific circumstances, and make sure the trust actually does what you need it to.

A solicitor with trust experience will typically charge somewhere between three hundred and one thousand pounds for a Will with trust provisions, sometimes more depending on the complexity. Compared to the value of the assets you're protecting and the potential tax at stake, that's almost always money well spent.

Not sure whether you even need a trust? Start with a conversation. Talk to our team or speak to a solicitor directly. You might find a simple Will covers everything, which is a perfectly good answer. But if trusts turn out to be the right move then getting the wording right from day one is what makes the difference.

*This article is for general information only and does not constitute legal or tax advice. Trusts involve complex legal and tax considerations that vary with individual circumstances. Always seek professional advice from a qualified solicitor and, where relevant, a tax adviser before creating a trust.*