Is a trust worth using for your estate planning?
A trust is a control mechanism rather than a tax shelter. It decides who benefits, when and on what terms, and it protects assets from a beneficiary's circumstances. What it usually does not do is reduce Inheritance Tax, because the relevant property regime charges on entry, at each ten-year anniversary and on exit.
- What it does well: controls timing, protects a vulnerable or young beneficiary, and survives divorce.
- The tax: a 20% entry charge above the nil-rate band, periodic charges, and exit charges.
- The running cost: trustee administration, accounts, tax returns and registration.
- The alternative: a well-drafted will, which does most of what people want from a trust.
01 What a trust is for
A trust separates legal ownership from benefit: trustees hold assets and decide, within the trust's terms, who receives what and when. That is genuinely valuable where the beneficiary is a child, is vulnerable, or where the assets need protecting from a divorce or a creditor.
It also handles complexity that a simple gift cannot. Providing for a second spouse for life while ensuring the capital passes to children from a first marriage is a classic use, and no outright gift achieves it.
None of that is a tax argument. It is a control argument, and control is worth paying for where the situation needs it.
Source: Trusts and taxes
02 The relevant property regime
Most lifetime trusts fall within the relevant property regime, which applies three charges. Putting assets in above the available nil-rate band triggers an immediate charge at 20%. Every ten years the trust is charged at up to 6% of its value. And assets leaving the trust attract an exit charge.
The design is deliberate: the regime approximates what would be charged if the assets passed through a generation, so that holding property in trust does not avoid the tax. It works, and it means the Inheritance Tax case for a discretionary trust is weak in most circumstances.
Bare trusts and some interest in possession arrangements are treated differently, and a trust created by a will has its own rules. The category matters more than the label, and it is the first thing to establish before any calculation.
Shows: the entry charge on assets settled above the nil-rate band, and the periodic charge at the next anniversary. Ignores: exit charges, the type of trust, business or agricultural relief, and running costs.
On the defaults above, the worked example shows £55,000. An entry charge of £55,000 now, and up to £36,000 at the ten-year anniversary — before any exit charge.
Source: Trusts and taxes
03 The costs nobody quotes
Trusts have to be registered with HMRC's trust registration service, and most have to file returns and keep accounts. Trustees have duties, and professional trustees charge for discharging them. Over decades those costs are substantial and they are the part omitted from the sales conversation.
There is also the practical cost of trustee decisions after your death: someone has to exercise discretion, and family trustees frequently find that harder than expected. A letter of wishes helps and is not binding.
For most households a well-drafted will, a current expression of wish on the pension, and the bands already available achieve what they wanted from a trust at a fraction of the cost.
Source: Register a trust as a trustee
Trusts get sold as tax planning and they are control planning. If you need to provide for a second spouse while protecting children from a first marriage, or to hold money for a beneficiary who cannot manage it, a trust does something nothing else does and it is worth every penny. If the pitch is that it saves Inheritance Tax, ask about the 20% entry charge, the ten-year charge and the exit charge, because the relevant property regime was built specifically to stop that working. For most families a good will and a current expression of wish do the job.
FAQ
Do trusts save Inheritance Tax?
Usually not. The relevant property regime charges 20% on entry above the nil-rate band, up to 6% at each ten-year anniversary, and an exit charge when assets leave. It was designed to approximate the tax that would otherwise fall on a generation.
When is a trust genuinely worth it?
Where control matters: a young or vulnerable beneficiary, protection from a beneficiary's divorce or creditors, or providing for a second spouse for life while preserving capital for children of a first marriage.
What does a trust cost to run?
Registration with HMRC, ongoing accounts and returns, and professional trustee fees where used. Over decades those costs are substantial, and they are the part least often quoted when a trust is proposed.
Sources
Regulator references
- Trusts and taxes · GOV.UK · 2025The charges a trust attracts, which decide whether it is worth using.Last verified: 2026-09-07
- Register a trust as a trustee · HM Revenue and Customs · 2026The registration duty that now attaches to most trusts, including bare and life policy trusts.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.