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Did you know? There are now around 835,000 trusts and estates registered in the UK, with more than 120,000 created in a single year, according to the HM Revenue & Customs.
Despite that scale, trusts are often seen as complex or only relevant for high net worth individuals. In reality, they are used much more widely, particularly by people who want more control over how their wealth is passed on.
At their simplest, trusts allow you to separate ownership from benefit. That means you can set assets aside for others while still shaping how and when those assets are used.
For many, that balance between control and flexibility is what makes trusts a useful part of long-term financial planning.
What is a trust: a simple explanation of how it works and who is involved
At its simplest, a trust is a legal arrangement where you pass assets to someone else to look after for the benefit of others.
There are three key roles involved:
- You (the settlor), who places assets into the trust
- The trustees, who manage those assets
- The beneficiaries, who receive the benefit from them
Once assets are placed into certain types of trust, they may no longer form part of your personal estate, particularly after seven years – although this depends on the type of trust used and your individual circumstances. Some trusts may still be subject to inheritance tax charges. Taking professional advice is essential before proceeding.
Why people use trusts: control, protection, and structured wealth transfer
Trusts are commonly used for three main reasons.
Control
They allow you to decide who benefits and how. Depending on the structure, you can set clear rules or give trustees flexibility to adapt over time.
Protection
Assets held in trust can be protected for future use, rather than being accessed all at once. This can be particularly useful where beneficiaries are younger or where you want to ensure wealth is used in a specific way.
Structured transfer
Trusts allow wealth to be passed on gradually rather than in one go. This can help align support with different life stages, rather than relying on a single transfer at the end of life.
Who uses trusts?
Trusts are commonly used by people who:
- want to support children or grandchildren over time
- have built up assets such as property, pensions or investments
- want more control over how wealth is passed on
- are thinking about inheritance tax and long term planning
In many cases, it is not about how much you have, but how you want your wealth to be used over time.
How much money do you need to build a trust?
There is no fixed threshold. Trusts can be used with a range of asset levels depending on your goals.
What matters more is how the trust fits into your wider financial position.
There are, however, some practical considerations:
- Trusts are often more suitable for larger sums of money, where they can play a more meaningful role in how assets are managed and passed on
- Some trusts may trigger inheritance tax charges depending on the value of assets placed into them and the type of trust used. The current standard nil rate band is £325,000 per person, though additional allowances may apply depending on your circumstances. IHT rules are complex and subject to change — including significant changes to pension assets from April 2027. Professional advice is essential.
- Ongoing administration and reporting costs need to be considered
Trusts are not about hitting a number. They are about whether the structure adds meaningful value to your overall plan.
How trusts can support your wealth and legacy over time
Trusts are often used alongside other planning strategies such as gifting.
Gifting can reduce the value of your estate over time. In many cases, no inheritance tax will be due on a gift if you survive seven years after making it. If you pass away between three and seven years after making a gift, a reduced charge may apply. The rules are complex and depend on your individual circumstances, so taking professional advice before making significant gifts is strongly recommended.
However, gifting alone means giving up control completely.
A trust offers a different approach. It allows you to move assets out of your estate while still shaping how they are managed and distributed.
This can support:
- earlier financial support for your family
- more structured long-term planning
- greater control over how wealth is passed between generations
Different types of trusts offer different levels of flexibility. For example, ‘absolute’ trusts provide certainty, while ‘discretionary’ trusts allow more flexibility but come with additional tax considerations.
How an adviser could help fit trusts into your wider financial plan
Trusts can be effective, but they are also technical.
They involve legal structures, tax considerations and ongoing responsibilities, including record keeping and reporting to HMRC. Trustees must act in the best interests of beneficiaries and manage the trust in line with its terms.
An adviser can help you:
- understand whether a trust is appropriate for achieving your goals
- choose the right type of trust for your situation
- structure it alongside pensions, investments and property
- keep it aligned with your wider financial plan over time
Most importantly, they can help you see how a trust fits into the bigger picture of your wealth and legacy.
A conversation with one of our independent financial advisers can help you see how trusts could fit into your wider financial plan. You can arrange a time to speak here: https://fcadvice.co.uk/book-an-appointment/
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing. Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Planning horizons are illustrative and will vary based on individual health, circumstances, and life expectancy.