Trusts are no longer just for the ultra-wealthy. If you own a rental property — or even your main home — a Trust could help you plan ahead, protect your assets, and manage inheritance tax. But it’s not right for everyone.
Here’s what you need to know.
What Is a Trust?
A Trust is a legal arrangement where you transfer an asset (like a property) to be held by trustees for the benefit of beneficiaries.
It separates legal ownership (held by trustees) from beneficial interest (received by beneficiaries).
You set the rules of the Trust in a legal document and choose:
- Who benefits
- When they benefit
- Who manages the Trust
Why People Use Trusts for Property
- ✅ To protect property from being sold against their wishes
- ✅ To control who inherits, especially in blended families
- ✅ To pass property on without waiting for probate
- ✅ To reduce Inheritance Tax exposure (if planned correctly)
🎥 Prefer to watch?
Here’s a short video where I explain the pros and cons of putting your property into a Trust — and why it’s not just for the wealthy.
But It’s Not a Loophole
Putting a property in Trust doesn’t mean you avoid tax.
You may trigger:
- Capital Gains Tax (CGT) if the property has gained value
- IHT charges if the value exceeds your available nil-rate band
- Ongoing Trust reporting requirements if it’s rented out
For most people, CGT is the main barrier — especially if the property has risen significantly in value.
Different Types of Property Trusts
Here are a few structures used in the UK:
1. Bare Trust
- The beneficiary has full control once they reach 18
- Simple and transparent, but not flexible
2. Discretionary Trust
- Trustees decide who benefits and when
- More flexible but more reporting and tax admin
3. Life Interest Trust
- Someone (e.g. a partner) gets the right to live in or receive income from the property during their lifetime
- The property then passes to someone else (e.g. children)
This can be useful for second marriages or where you want to provide housing security without full ownership.
Should You Use a Trust?
It depends on your goals. Trusts can:
- Protect assets
- Control succession
- Offer privacy
- Reduce estate value for IHT (in some cases)
But they also:
- Trigger upfront tax
- Need legal documents and trustees
- Come with ongoing admin
Related Reading
Not sure if a Trust or outright gift is better? Read our breakdown on gifting property: Transferring Property to Your Spouse or Children: What Taxes Apply?
Final Thoughts
Trusts can be powerful tools for property planning — but only if set up for the right reasons.
They don’t suit everyone, and the tax costs can outweigh the benefits if you get it wrong.
📞 Book a clarity call if you’re thinking about putting your property into Trust. We’ll help you make the right decision for your situation.