Bare trusts — IHT

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Bare trusts - IHT
  • What is a bare trust?
  • Assets held for children
  • Jointly owned land
  • Incapacity of the beneficial owner
  • Absence of the beneficial owner
  • Investments held in a nominee account.
  • IHT status of a bare trust

Bare trusts - IHT

What is a bare trust?

The term 'bare trust' applies to an arrangement where the legal ownership of property is in a different name from that of the person beneficially entitled to it. The person entitled to it has absolute rights to both capital and income, but the legal owner will conduct the management of it. Some of the situations in which a bare trust might arise are described below.

Assets held for children

Minors do not have the legal capacity to enter into an enforceable contract or give a valid receipt. Property which, in equity, belongs to a child must be held in the name of a trustee. Whilst the child is under 18, the trustee, usually a parent or guardian, manages the property according to their own judgment, even though it belongs absolutely to the child. But if the child's rights to the property are not subject to a legal restriction, other than their incapacity as a minor, the child has the right to take possession of the property at the age of 18 and deal with it as he wishes.

This situation will arise where children are given outright gifts in a Will, not subject to an age contingency. It is also very common with children's savings accounts funded by grandparents and other relatives. Parents may set aside funds for children in a bare trust to obtain a legal se

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