Trusts · 10 min read · Published
Setting up a trust for your children or grandchildren
How a trust lets you leave money or property to children or grandchildren without handing it over at 18. It covers the main types, and what they cost.
By Aaron Johnson, Consultant Solicitor and TEP, a solicitor in Bridlington who writes every guide himself.
This guide is general information about the law of England and Wales, not legal advice. Each case is assessed on its own merits.
Guides · Trusts · No. 8 of 12Published · 10 minutes
Most parents and grandparents want to leave something to the next generation. Handing a large sum to an 18-year-old is not always wise. A trust lets you provide for children or grandchildren while keeping sensible controls in place.
This guide explains the main types of trust used for young beneficiaries, how they work and what they cost.
Why use a trust for children
In England and Wales a child under 18 cannot own land in their own name or give a valid receipt for an inheritance. If your will leaves money directly to a child, trustees hold it until the child turns 18 and then hand over the whole amount.
A trust gives you more control:
- Set the age they inherit: you decide when they are ready (21, 25 or even 30)
- Some protection from outside risks: trust assets are harder for a divorce settlement, a creditor or a failed business to reach
- Support education: trustees can release money for school fees, university or training
- Staged payments: a third at 21, a third at 25 and the rest at 30
- Protect a vulnerable beneficiary: if a child has a disability or additional needs, a discretionary trust can provide lifelong support. The fund is not normally counted as the child's capital for means-tested benefits, but payments out of it can be.
Types of trust for children
Comparing Trust Types for Children
| Discretionary Trust | Bare Trust (Simple Trust) |
|---|---|
| Trustees decide when and how to pay out | The child has an absolute right to the assets at 18 |
| Most flexible; can adapt as circumstances change | Simpler to run and understand |
| Assets are not automatically part of a beneficiary's estate | Assets belong to the child and are part of their estate from the start |
| Can cover several beneficiaries (all your children or grandchildren) | Less protection from divorce or money problems |
| The most common choice for families | Suits smaller amounts |
There are also more specialised options:
18-to-25 trusts: these can only be made in the will of a parent or step-parent (or someone with parental responsibility) for their child. They hold assets until the child reaches an age you choose between 18 and 25. Grandparents cannot use them for grandchildren. Their inheritance tax treatment is more favourable than a discretionary trust's.
Disabled person's trusts: for a child with a disability. If the trust is discretionary, the fund is not normally counted as the child's capital for means-tested benefits such as Universal Credit. Payments to or for the child can still be taken into account.
Life interest trusts: more often used for a spouse, but can give a child an income (rent, for example) while the capital is kept for the next generation.
Setting up a trust for your children
The simplest and most common way is through your will. This is called a 'will trust' or 'testamentary trust'. It takes effect only on your death.
Setting Up a Will Trust for Children
- Decide what you want to achieveYour aims shape the type of trust. Common aims are protecting the inheritance until they are older, protecting it from divorce, and paying for education.
- Choose your trusteesPick two or three people you trust completely. They will manage the assets and decide on payments. Consider a mix of family and a professional such as a solicitor.
- Set the termsDecide when the beneficiaries can have the money, whether all at once or in stages. Decide too what it can be used for before then.
- Include it in your willYour solicitor drafts the trust into your will. No separate trust document is needed.
- Write a letter of wishesA non-binding letter explaining your hopes and intentions. It guides the trustees without tying their hands.
Tax on a children's trust
Trusts have their own tax rules. Understand them before you set one up.
Inheritance tax: A will trust does not attract a separate inheritance tax charge when it starts; the assets are part of your estate's calculation. A home left on a discretionary trust usually does not qualify for the residence nil-rate band, so more tax may be due. A discretionary trust may then face a charge every ten years of up to 6% of its value above the nil-rate band, and exit charges when money leaves. Putting assets into a lifetime discretionary trust is taxed at 20% on any value above your available nil-rate band. More may be due if you die within seven years.
Income tax: Income kept in a discretionary trust (rent or interest) is taxed at 45%, and dividends at 39.35%. A beneficiary who pays tax at a lower rate can reclaim some of it on income paid out to them.
Capital gains tax: A trust has an annual exemption of £1,500, half the individual allowance (£3,000 where the beneficiary is disabled). Gains above that are taxed at 24%.
Family trust planning in Bridlington
Many people in Bridlington and East Yorkshire want to leave assets to children or grandchildren. They worry about handing everything over at 18. If you are concerned about maturity, marriage or protecting what you worked for, a trust is often the answer.
Aaron drafts trust provisions in wills and explains every decision clearly. His fees are fixed. A will with a trust in it for one person, a couple's wills with a trust in them, and a lifetime trust for cash, investments or a life policy are each priced on their own. Every fee, with VAT, is on the fees page.
A trust is not about controlling from beyond the grave. It gives your family the best possible start with sensible safeguards.
Sources
The official pages behind the rules this guide explains. Each was checked on .
Written by Aaron Johnson, Consultant Solicitor and TEP · Law of England and Wales as at 20 March 2026 · Ends
