A bare trust sometimes known as a 'simple trust' is one where the beneficiary has an immediate and absolute right to both capital and income in the trust.
Someone who sets up a bare trust can be certain that the assets (such as money, land or buildings) they put into the trust will go directly to the beneficiaries they intend.
Once the trust has been set up, the beneficiaries can't be changed. The contents of the trust are treated as belonging to the beneficiary and so, under present rules, there are no inheritance tax charges on the trust or when property or assets leave the trust.
The income tax and capital gains tax treatment of the trust is also straight-forward.
Transfers into a bare trust may also be exempt from Inheritance Tax, as long as the person making the transfer survives for seven years after making the transfer.
The trust assets are held in the name of trustees (the persons managing and making decisions about the trust) and are responsible for the care of the assets until the beneficiary is 18, when the beneficiary can demand that the trustees pay over the trust fund.
Bare trusts are commonly used to transfer assets to minors.
For more information please contact David Edwards or Jodi Hughes.
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