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Trusts for IHT planning

Journalist: Emma Lunn, Freelance

ended 17. April 2025

I am writing a feature for Saga about whether over 50s should set up a trust for their grandchildren. 

Things  I need answering by financial planners/tax experts/financial advisers/solicitors are: 

What are the main types of trust (bare/discretionary)? 

Are trusts just for rich people?

What sort of families/situations can benefit from a trust? 

What are the tax benefits of a trust? 

Will a trust save your family IHT? 

Should you take professional advice before setting up a trust?

Comments should be aimed at over 50s/retirees. Experts need to be UK-based and not AI. Thanks.

6 responses from the Newspage community

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Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Trusts are becoming more appealing for IHT planning, particularly given the change to how pensions will be treated from IHT (they will start to be included in the estate for IHT purposes).

We tend to see trusts set up by parents and grandparents for their children and grandchildren. A discretionary trust offers flexibility in that the trustees (the people nominated to make decisions on how the money is used) can choose from categories of beneficiaries to pay money out to. These categories usually include children and grandchildren.

Once someone puts into a trust and seven years passes, the money is now out of their estate for IHT purposes. However, they will often also be a trustee so can still exercise direction over when, how and to who money is paid out to.

They'll often nominate other trustees who will continue with this repsonsibility when they're no longer able to.

There are tax implications of trusts so it's important to speak with a financial adviser and tax adviser.
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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
If you are thinking trusts as part of your inheritance tax strategy then it is key to get proper personalised financial advice. When it comes to trusts, it is not a case of one size fits all. Poor planning could leave your estate with some big financial consequences.
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Editor
Bob Singh
Founder at Chess Mortgages
Trusts can be a great way to plan generational wealth preservation.

Trusts have been around for centuries but in estate planning they’re taking on greater importance as successive governments have sought to penalise the wealthy who fail to plan.

Trusts are no longer the preserve of lawyers and many highly qualified professionals offer this valuable service to their clients who do not necessarily have to be well heeled to avail such advice.

Trusts can be used during one’s life and after. Through the use of various types of trusts one’s estate and wealth can be passed to the next generation with little or no inheritance tax. The key is to start planning early as death bed planning rarely works.

Parents and grandparents can settle funds and assets into various trusts within limits and safeguard them from attack and misuse. The trustees appointed at outset can act in the best interests of the beneficiaries as directed by the trust deed.

Expert guidance is key
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
I am thankfully not 50 yet, but we have gone through this on a personal level. We opted for a discretionary trust with tailored clauses to safeguard family assets and control distributions, but the 10-yearly periodic charge of 6% on the asset values exceeding £325k threshold was the biggest conundrum. You really need to tailor this to your family's circumstances. There is no right or wrong answer. The other concern with moving shares of a family business into a trust is that you effectively lose control over a lot of things you could have done, had you owned the shares outright. For example, raising capital against the shares in a trust are a major pain, and lenders won't always be happy. As property investors and landlords, we needed to be able to leverage the assets as and when required. So, in my opinion, while the headline grabbing IHT savings is attractive (40% on estates over £2m), the recurring fee and loss of control needs to be evaluated by each family on their circumstances.
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Colin Low
Managing Director at Kingsfleet
Primarily, there are simply bare or discretionary trusts and all IHT solutions are a derivation of these.
Many IHT arrangements are provided through providers who offer an ‘off the shelf’ solution which does not require additional legal work. Consequently, the establishment costs are really quite modest.
Even if a lawyer is required to establish a trust, most arrangements are relatively straightforward and won’t have a significant legal cost to create.
Trusts must be registered with the HMRC Trust Registration Service (TRS) which can be done by a Trustee or professional.
Advice should always be taken regarding potential tax liabilities for both the trust and the beneficiaries.
Trusts ensure that the right money goes to the right people at the right time.
They are especially helpful to plan to reduce or mitigate IHT and varying structures can provide future access to capital or continuing income.
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David Robinson
Co-Founder at Wildcat Law
When it comes to estate planning keep it simple is the best mantra. If you are looking to pass wealth to grandchildren do it sooner rather than later. If you have excess income think about regular gifts to grandchildren, perhaps to pay school fees, fund university fees or even start a pension. Payments from income are not caught by IHT so this is a great way to pass wealth meaningfully and without tax to grandchildren.
Beware online adverts for Trust solutions promising to protect property from care bills, many of these schemes are flawed and result in significant loss to the estate.
Unless you have significant wealth Trusts are unlikely to be a solution for you outside a basic bare trust written into your will for minor children. Due to the cost and complexity of operating a Trust they are best used where control of money is your priority, this might be because you are worried that a beneficiary may get divorced for example. If you do want a trust go to a specialist!