Trusts For Minor Children – The Bare Necessities

If you are thinking of leaving your assets to your minor children or grandchildren in your Will, you will likely be doing so under a Bare Trust.

Minor beneficiaries cannot legally hold money or property, and so a Bare trust operates to deal with the practicalities of passing these assets on.

Bare trusts most commonly arise in Wills, although they can also be created through written Declarations of Trust or by simple conduct. For example, opening a bank account, including the name of the minor beneficiary.

Under a Bare trust:

• The trustees hold the legal title to the assets; but
• The minor beneficiaries have an absolute entitlement them.

This means that the trustees act purely as custodians of the assets until the beneficiaries reach adulthood and can call for the release of the assets. The trustees cannot use the assets for any other purpose.

Trustees and Guardians

When considering your Will, one of your top concerns is likely to be the guardians for your minor children. It is advisable to appoint the same people as the trustees or executors and guardians, as this will make day to day expenses for your children easier to manage. However, in practice this may not work for every situation. It is therefore important to consider whether your trustees and guardians can work together for the best interests of your children, as your trustees will all need to agree on any release of assets.

Responsibilities of Trustees

Trustees of a Bare trust are under obligation to act in the best interests of the minor, maintain accurate records of how the trust fund is kept, ensure the assets are kept separate from their own property and transfer the assets to the beneficiary once they reach adulthood. They are also under a duty to take financial advice, and invest any funds. This may take the form of an interest-bearing account, although what is appropriate will depend on the amounts involved.

Your wishes

You may have wishes on how you would the trust fund to be used. For example, for life events such as buying a car. To aid your trustees in making such decisions, it is a good idea to write a letter of wishes setting out how you would like the trust to be run, although your trustees would not be legally bound to follow it.

When is a Bare Trust suitable?

Bare trusts are the most straightforward trust arrangements in English law. Although they carry significant responsibilities for your trustees, there are circumstances in which they may not be appropriate. If you are looking to exert control over how the trust assets are used, or delay the payment of the trust fund beyond the age of 18, a discretionary or interest in possession trust may be more suitable.

If you are thinking of setting up a Bare Trust, or if you are looking for advice on setting up a trust, contact our Private Client team today to arrange an appointment with one of trust experts, or call 0800 088 6004