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Bare Trust Deed

Our Bare Trust Deed template:

  • Now over 100 sold!
  • A trust deed commonly used to pass assets to a child
  • Also used for a corporate trustee to hold a cash investment
  • Drafted by an expert UK solicitor
  • Legalo’s money-back guarantee
  • Full guidance notes included
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How Does It Work?

  • 1. Download
  • 2. Edit
  • 3. Print
  • 4. Sign

This is our template for a Bare Trust Deed. This allows you to create a new trust and sets some basic rules and powers for the trustees.

Why would you use a bare trust?

Common uses of a bare trust include:

  • spouses owning investment property and, later, changing their ownership percentages;
  • a Disabled Person’s Trust (where it is impractical to use a discretionary trust with 2 or more beneficiaries);
  • having a corporate trustee receive a cash sum for investment; and
  • when you are passing assets to a child (a trust is essential if the assets are, or include, land and buildings in England and Wales, or UK shares).

As a “bare trust”, there is nothing to stop the beneficiary asking for the property or assets (and any income that arises from the assets) in the trust to be transferred immediately to the beneficiary. This is providing the beneficiary is at least 18 years old in England or 16 in Scotland.

As a bare trust, the trustee must obey the instructions given by the beneficiary. This is providing the beneficiary is at least 18 years old in England or 16 in Scotland.

Now over 100 sold!

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What about a discretionary trust?

If you don’t want those possibilities, then you will need a “discretionary” trust deed, but we do not currently offer one of those as a template at Legalo. This is because they tend to (a) be much more complex and (b) have complex tax arrangements, as they are designed to save tax. The bare trust is a much simpler document.

If you are still sure that you need a discretionary trust, firstly, make sure you have selected at least 2 beneficiaries, as this is a fundamental requirement for a discretionary trust. you can’t have a discretion over who gets what if there is only 1 possible beneficiary in the trust. If this is OK, then find a solicitor to help you set up the discretionary trust and ensure it is tax compliant.

When to use this trust template

You can use our bare trust deed for the holding of any type of property, for example:

  • the proceeds of a personal injury claim;
  • shares;
  • land and buildings; and/or
  • cash.

Simply set out what assets are to be in the trust in the schedule to the deed.

If instead of setting up any form of trust you are happy to make an outright gift now, you can instead use our template for a Deed of Gift as evidence that you made such a gift of the stated assets on a particular date. For the same reasons we note above, you cannot use a deed of gift if the gift is being made to a child and the gift is of:

  • land and buildings in the UK or
  • UK shares.

When not to use this trust deed template

Firstly, do not put assets into trust if you are insolvent or bankrupt. Such a move can be unravelled by a trustee in bankruptcy as an attempt to defraud your creditors.

Secondly, do not put assets into a trust to reduce your net worth when you are on Benefits or applying for Benefits. This is illegal and constitutes benefits fraud.

Thirdly, you should not put an asset, such as property, into a trust for someone, but aim to receive the income arising from it, such as rent or dividends. Once you have set up a trust, all the income would belong to the trust as of the date the asset was put into the trust.

Use of a trust to hold assets belonging to children

The most common use of a bare trust is when you are passing assets to a child. The assets can remain in the trust until they reach the necessary age, as we note above.

A trust would be necessary in the case of passing land in England and Wales to a child. This is because the law does not permit children to be on the legal title (the title deeds) to the land until they reach adulthood at age 18. In the meantime, they could be the beneficiary of the land under a bare trust until they become 18 years old. At that point, they could have the title to the land transferred to them.

Use of a trust for spouses changing ownership percentages

Sometimes, when a couple has an existing investment property, the husband or wife will choose to gift part of the property to the other spouse. It might be for tax reasons. (Such a gift between spouses is free of tax.) Firstly, if they own it as joint tenants, they will use a Notice of Severance to alter this to being owned by them on a tenants-in-common basis. They would file an SEV form with the Land Registry to note this change. Then they can hold the property in unequal percentages of their choice.

For this, they can either (a) file a TR1 with the Land Registry, or (b) they can use our Bare Trust Deed, to have both spouses declare the new ownership basis. The trust deed avoids the need for filing a TR1 to change the ownership percentages on the title. It also keeps your ownership percentages off the public register.

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FAQs on Bare Trusts

People often have questions about bare trusts and their use. We address a few of the most popular ones below.

Is a bare trust a good idea?

If you want to set up a trust, a good, simple solution is a bare trust. It is much easier to set up than a discretionary trust, as it is not trying to gain a tax advantage, so has few requirements to comply with. It is a very good solution when you are holding the assets in trust for a child. If you want to give shares to a child, then setting up a trust to do this is the only option, as children are not allowed to buy shares in the UK.

Do you need a trust deed for a bare trust?

Yes. The document setting up the trust is called the trust deed.

What documents are needed for a bare trust?

A trust deed is the only document you need to set up a trust. The trust deed will specify who the initial trustees are.

You can also set up a bare trust through your Will, and in that case the Will is the only document you need. Legalo’s Will templates are simple and do not include any trusts, except for the Will with a life interest trust.

Does a bare trust have to be in writing?

Yes in practice. You’d have no evidence that you had created a trust (or the date you did so, the amount of assets that you put in the trust, or who the trustees are who the beneficiaries are) if it were not in writing. In short, you’d be in a total muddle. HMRC would have a problem with that. To put land into a trust, there is an absolute legal requirement that you do so in writing.

What are the legal requirements of a bare trust?

There must be a deed in writing, signed by the person(s) setting up the trust (the settlor(s)), specifying as a minimum:

  1. the date you or they created the trust;
  2. what assets you or they put into the trust;
  3. who the trustees are;
  4. who the beneficiaries are; and
  5. if there is more than 1 beneficiary, in what proportions they each own the assets.

How much does it cost to set up a bare trust in the UK? How much does a bare trust deed cost?

While it will several hundred pounds to have a solicitor set up a simple bare trust for you, you can save a lot of money by using a trust template from Legalo. Ours template is priced at just £50. It comes with a full written guide, to make filling it in easy and fast.

How do you draft a bare trust?

While you can do so yourself, Legalo’s bare trust deed template (and its written guide) make this very easy for you to do, and it ensures you cover all the necessary aspects.

Can I draft my own bare trust deed?

You can do so, and you will find that a template from Legalo makes it so much easier to do this, and it helps you avoid mistakes or leave anything essential out. You don’t have to use an expensive solicitor when you can do this for yourself with the help of a Legalo template.

Does a bare trust deed have to be registered with HMRC?

Yes. Due to a recent change in the law, you need to register all trusts with HMRC shortly after creation. This does not necessarily mean that you have to pay tax as a trust. A bare trust saves no tax, so also incurs no tax for which it is liable – the beneficiaries are liable for the tax though (or the parents, in the case of a trust set up by parents for their children). See the next question about taxing a bare trust.

Does a bare trust need to complete a tax return?

A bare trust is “transparent” for tax, so this means it does not file its own tax returns or have its own tax allowances. Instead, generally the beneficiaries are the ones liable for any tax, e.g. on income (if any) that the trust generates for the assets in it. For example, this would include interest on a bank account or rent on an investment property. There is an exception where parents have put assets into trust for their children. The parents remain liable for the tax in this case.

How many beneficiaries can a bare trust have?

There is no limit on the number of beneficiaries a bare trust can have. If land in the UK is owned by more than 4 people, then (as you can only put a maximum of 4 on the title deeds at the Land Registry) you would need a declaration of trust of some sort, in order for the other owners to be legally recognised.

Who controls a bare trust?

Until the beneficiaries intervene, the trustees control the trust and run it from day-to-day. However, as it is a bare trust, the beneficiaries can ask for the property to be transferred directly into their names.  So ultimately they control it, as they can bring it to an end. There is an exception to this when the beneficiary is under 18, or in Scotland under 16. A child cannot ask for you to transfer the assets to to them until they reach such an age. So, until then, the trustees genuinely control the assets in the trust. A transfer of all of the assets to the beneficiaries will terminate the trust.

Nominee trusts

You can also use our bare trust deed to set up a “nominee trust”. This is very similar to a bare trust.

Aside from our general bare trust deed, we also have nominee trust deeds for the following more specific purposes:

For more about bare trusts from Wikipedia, click here. For more about nominee trusts from Wikipedia, click here.

Register your trust with HMRC

As of 6 October 2020, you now need to register all new trusts with HMRC, even ones that are not taxable. You have 90 days from the date of creation of the trust to register it. Find out more and register here. Don’t forget to register yours. This is fairly straightforward to do by yourself, so you do not need a professional to help you. However you will need a lot of information, so read HMRC’s notes and gather what you need, before launching into it.

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