This is a trust where the beneficiary has a total and immediate right to the entire trust fund. This type of trust can arise by express arrangement or by natural operation of the law.
The most common example is an absolute gift to a minor. A gift by Brenda’s Will of ‘£1,000 to David absolutely’ will create a bare trust if David is not 18 when Brenda dies. David is beneficially entitled to the £1,000 (and any income arising) but cannot hold legal title because he is not an adult. The bare trustee (often the parent) will manage the funds until the child is 18, at which point they can demand payment.
Another common situation is where real property is held jointly. Those names registered as proprietors at the Land Registry (which cannot exceed four) hold the land on bare trust for all equitable owners (which has no theoretical maximum).
There are other examples of bare trusts, but the implications are the same – the bare trust beneficiary is the absolute owner with indefeasible rights.
For income tax and CGT purposes, bare trusts are transparent - the tax bites on the beneficiary and not the trustee, subject to some exceptions (such as a parent who creates a bare trust for their minor child). The IHT legislation does not recognise bare trusts as settlements, and thus the beneficiary is treated as owner for all IHT purposes.