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Is Setting Up a Trust a Good Idea?
13 November 2025
Accounting & Compliance, Building a Business, Property Investors & Developers, Reducing Tax
When people think of trusts, they often picture complicated legal arrangements or something only the very wealthy need.
In reality, setting up a trust can be a smart and practical way to manage your assets, protect your family’s wealth, and plan for the future.
But you need to make sure you get the right advice first.
So, is setting up a trust a good idea for you?
We take a closer look at how trusts work, their benefits, and some of the things to be aware of.
What Is a Trust?
A trust is a legal arrangement that decides how assets such as money, property, or investments are owned and managed.
There are three main roles involved:
The Settlor: The person who sets up the trust and transfers assets into it.
The Trustees: The people responsible for managing the trust’s assets according to its terms.
The Beneficiaries: Those who benefit from the trust’s assets or income.
A solicitor usually prepares the trust deed, while an accountant can help with registration, managing tax obligations and annual reporting.
Why Set Up a Trust?
Trusts can be incredibly flexible and are often tailored to fit personal and family circumstances.
Here are some of the main reasons people choose to set one up:
Staying in Control
If you’d like to give an asset to someone, perhaps a child or grandchild, but feel they’re not ready to handle it yet, a trust allows you to gift it while still retaining some control over how and when it’s used.
Protecting Vulnerable Loved Ones
Trusts can help manage money on behalf of someone who can’t manage their own finances, for example due to illness, disability, or age.
They can also be useful where someone receives means-tested benefits, ensuring their financial support isn’t affected.
Safeguarding Family Wealth
Putting assets into a trust can help protect them from claims in situations such as divorce or bankruptcy.
They can also help keep wealth within the family, for example by allowing one person to use an asset for life before it passes to someone else.
Potential Protection from Care Fees
In some cases, assets held in trust may not be counted towards care home fee assessments.
However, local authorities can disregard a trust if they believe it was created primarily to avoid such fees, so this must be approached carefully.
Tax Planning Opportunities
Trusts can also be useful for tax efficiency.
You can usually gift up to £325,000 into a trust every seven years without paying inheritance tax.
Income from assets can be distributed to family members with lower tax rates, reducing the overall tax bill.
When structured properly, trusts can be a valuable part of your inheritance and income tax planning strategy.
The Downsides to Consider
Trusts offer many advantages, but they’re not without costs or responsibilities.
Setup and ongoing costs
Solicitors’ and accountants’ fees apply for creating and maintaining the trust.
Tax rules
If you continue to benefit from an asset you’ve placed in a trust.
For example, still living in a property you’ve gifted, it may still count as part of your estate for inheritance tax.
10-year charges
Some trusts, such as discretionary trusts, are subject to a small inheritance tax charge every ten years (around 6% on amounts over the £325,000 threshold).
Good professional advice can help you navigate these points and make sure your trust works exactly as intended.
So, Is Setting Up a Trust a Good Idea?
In the right circumstances, yes setting up a trust can be a great idea.
It can help you manage your wealth responsibly, protect loved ones, and plan efficiently for the future.
However, no two trusts or families, are the same.
The best approach is to seek expert advice from both a solicitor and an accountant before making any decisions.
Find out if a trust would work for you
If you’d like to find out whether setting up a trust is right for you, our team can help with every step.
From forming and registering the trust with HMRC to managing its ongoing tax affairs.
Contact our team today to discuss how a trust could work for you.
Our Services
To read more about our services please see our related pages below:
Related blogs
Take a look at our other blogs on the topic of Inheritance Tax:
The pros and cons of setting up a trust
Have you considered trusts for holding family investments?
The content in this blog is correct as at 13th November 2025. See terms and conditions.
