Trusts Explained: What They Are And What Trustees Need To Know

Trusts can sound complicated, but they are often created for a very practical reason: to look after money, property or other assets for someone else.

They can help protect young beneficiaries, provide for a spouse or partner, support someone vulnerable, or give families more flexibility over how assets are managed and passed on.

In this guide, we explain what a trust is, the main types of trust and the key responsibilities trustees should keep in mind.

What is a trust?

A trust is a legal arrangement where one or more people, called trustees, hold and manage assets for the benefit of others, known as beneficiaries. The trustees do not own the assets personally. Their role is to look after them in line with the trust document, the law and the interests of the beneficiaries.

Some trusts are straightforward. Others need more ongoing support, particularly where there are tax, property, investment or family considerations.

What are the main types of trust?

There are many different types of trust. The right option will depend on what the trust is intended to achieve, who it is designed to help and how much flexibility is needed.

 Some of the most common trusts include:

Type of trust	Plain English explanation	Common use	Administration points
Bare trust	The beneficiary is absolutely entitled to the asset, even though it is held by the trustee.	Often used where assets are held for a child until they are old enough to deal with them.	Keep ownership records clear and understand when the beneficiary becomes entitled to call for the asset.
Life interest trust	One person has a right to benefit during their lifetime, often by receiving income or occupying a property, while others inherit later.	Common in wills where someone wants to provide for a spouse or partner while ultimately preserving assets for children or other beneficiaries.	Balance the interests of the life tenant and the remainder beneficiaries. Review income, capital and property arrangements carefully.
Discretionary trust	Trustees decide which beneficiaries benefit, when and in what amounts.	Used where flexibility is needed, for example where family circumstances may change.	Record trustee decisions, consider all relevant beneficiaries and refer to any letter of wishes.
Trust for bereaved minors	A trust for a child who has lost a parent, usually created by will or intestacy rules.	Used to hold assets for a minor until the required age or entitlement point.	Check the terms carefully, monitor age-related entitlement and keep suitable records.
18-25 trust	A trust for a young person who becomes entitled between ages 18 and 25.	Often used in wills where a parent wants delayed access beyond age 18.	Track the beneficiary’s age, understand the tax position and plan for eventual distribution.
Vulnerable person’s trust	A trust designed to support a beneficiary who may need additional protection.	Can be used where a beneficiary has a disability or is otherwise vulnerable.	Administration should be particularly careful, person-centred and supported by specialist tax and benefits advice.
Charitable trust	A trust established for charitable purposes.	Used where assets are dedicated to a charitable cause.	Trustees must ensure the trust’s purposes, records and use of funds remain properly charitable.

Why trusts are about more than tax

Tax may be part of the discussion, but trusts are often about much more than tax planning. For many families, they provide structure, protection and continuity.

A trust can help ensure assets are managed responsibly, rather than being passed on before a beneficiary is ready or before wider family circumstances are clear. For example, they can safeguard wealth from young beneficiaries and protect assets from third-party risks like divorce settlements or bankruptcy actions.

What good trust administration looks like

Good trust administration is about keeping on top of the basics and making sure decisions are clear, considered and properly recorded.

1. Understand the trust document

The trust document is the trustees’ starting point. It sets out who the beneficiaries are, what the trustees can and cannot do, and whether any particular restrictions apply.

2. Keep proper records

Trustees should keep copies of the trust document, accounts, tax information, investment statements, correspondence and notes of important decisions.

3. Make decisions carefully

When trustees make decisions, they should consider the terms of the trust, the needs of the beneficiaries and any relevant advice. It is also sensible to record why key decisions were made.

4. Review the trust assets

Trustees should understand what the trust owns, how assets are held or invested, whether any property is insured and whether the arrangements remain suitable.

5. Communicate appropriately

Clear communication can help avoid confusion and reduce the risk of disputes. The level of information shared will depend on the type of trust and the beneficiary’s entitlement.

6. Check tax and registration requirements

Trustees may need to deal with tax returns, inheritance tax reporting, capital gains tax, income tax and Trust Registration Service requirements. Many UK trusts, and some non-UK trusts with UK links, need to be registered with HMRC, and the details may need to be kept up to date.

7. Take advice at the right time

Professional advice can be particularly helpful where the trust involves property, investments, vulnerable beneficiaries, trustee changes, tax issues or distributions.

Common mistakes trustees should avoid

• Treating trust assets as if they belong personally to one trustee or one beneficiary. 
• Failing to keep clear accounts and records of decisions. 
• Not checking whether the trust needs to be registered or whether registered details need updating. 
• Ignoring investment, property or insurance reviews. 
• Making distributions without checking the trust document, tax position and beneficiary circumstances. 

Trustee health check and key questions to ask each year

Even where a trust is running smoothly, it is sensible to review it regularly. A simple annual check can help trustees stay on top of their responsibilities and spot any issues early. Useful questions include:

• Are the trustees still the right people to act? 
• Are the trust assets correctly recorded and adequately protected? 
• Are investments still suitable for the beneficiaries and the purpose of the trust? 
• Are tax returns, accounts and registration details up to date? 
• Have any beneficiaries’ circumstances changed? 
• Is advice needed before any major decision or distribution? 

What’s best – a family trustee or professional trustee?

There is no single right answer. A family trustee may understand the family dynamics, the beneficiary’s needs and the wishes behind the trust. A professional trustee can bring independence, experience, continuity and technical oversight.

In some situations, a combination of family and professional trustees can work well, particularly where the trust is long-running, valuable or sensitive.

How Napthens can help

Trusts can be extremely useful, but they work best when they are set up and managed properly. Whether you are creating a trust, acting as a trustee or reviewing an existing arrangement, taking advice early can help you understand your responsibilities and make confident decisions.

Our private client team can help with trust creation, trustee responsibilities, trust administration, tax and registration considerations, and practical advice for families and beneficiaries.

If you would like to understand whether a trust is right for your circumstances, or you need support with an existing trust, our private client specialists are here to help. We can talk you through your options in plain English and provide practical advice tailored to your family, assets and long-term wishes. Visit our Wills, Trusts and Probate service for more information and to explore the people behind the team.

FAQs about trusts and trustees

1. What is the purpose of a trust?

A trust allows assets to be held and managed by trustees for the benefit of one or more beneficiaries. Trusts are often used to protect assets, support family members or manage wealth over time.

2. What does a trustee do?

A trustee manages trust assets in line with the trust document, the law and the interests of the beneficiaries. This may include keeping records, making decisions, dealing with tax and taking advice where needed.

3. Does a trust need to be registered with HMRC?

Many UK trusts, and some non-UK trusts with UK links, need to be registered on HMRC’s Trust Registration Service. Trustees may also need to keep the trust’s details up to date.

4. When should trustees take legal advice?

Trustees should consider taking advice when setting up a trust, making distributions, dealing with tax or registration requirements, changing trustees, managing property or investments, or supporting a vulnerable beneficiary.

5. Can a family member be a trustee?

Yes. A family member can act as a trustee, but they must understand the responsibilities involved. In some cases, appointing a professional trustee can provide additional independence and expertise.