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What’s a Bare Trust?

A Bare Trust through the HL Fund and Share Account is a legal, binding arrangement where money or assets are held by trustees (usually parents or grandparents) for the future benefit of a child (the beneficiary). Bare Trusts are useful for saving for children because they allow you to gift money or other assets for children’s benefit before they are old enough to hold and control them outright.

Bare Trusts are the simplest type of trust. They’re set up when a settlor (often a grandparent) makes a permanent gift into an account where a child’s named as the beneficiary. There are normally at least two trustees, and a suggested maximum of four – the settlor may choose to be a trustee so they can remain in control of how the money is invested.


Are there any tax benefits of Bare Trusts?

Bare Trusts are useful for inheritance tax (IHT) planning as gifts to trusts can reduce the value of your estate, and therefore reduce the amount of IHT that may need to be paid in the future. Once a gift is made to a Bare Trust, the settlor (the person making the gift) will need to survive the gift by seven years before it falls outside of their estate. There are also certain gifts that are IHT exempt from outset such as the annual exemption of £3,000 or regular gifting from surplus income.

Additionally, any gains or income in the trust belong to the child and are taxed as such, meaning there’s often little or no tax to pay. An exception to this rule is income on gifts from a parent– if the income exceeds £100, it’ll be taxed as if it belongs to the parent.

Tax rules can change and benefits depend on personal circumstances.


What are the charges?

It’s free to hold shares in the Fund and Share Account for the Bare Trust. However, share dealing costs a maximum of £11.95 per UK deal online.

For funds, there are no dealing charges, but there’s a maximum annual charge of 0.45% and funds can have their own charges.

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How much can I invest in a Bare Trust?

There are no investment limits. You can open a Fund and Share Account for a Bare Trust with as little as £1 or from £100 to invest in funds. Or you can set up a Direct Debit from £25 per month.

Investments go up and down in value, so the child could get back less than the amount originally invested.


Who can open a Bare Trust?

The settlor, trustees and beneficiary must all be UK residents.


Can I withdraw from a Bare Trust?

The child is automatically entitled to the assets held in a Bare Trust when they turn 18 (16 in Scotland) and the money normally remains in trust until that time. However, the trustees can potentially withdraw money earlier, as long as it’s for the benefit of the child.


How do I register the trust?

All new Bare Trusts must be registered with HMRC’s Trust Registration Service (TRS) within 90 days of the trust being set up.

If the trust is already set up, we ask you to provide us with a copy of the ‘Evidence of the trust’s registration’ document when applying for an HL account. For new trusts, we ask you to send this document to us after the account has been set up. Before registering a trust as a trustee, you need to have an Organisation Government Gateway user ID and password. If you don’t have a login, you can create one when you register. Please note, you can’t add or withdraw money until we have received the registration document.

More information on registering with the TRS can be found at: https://www.gov.uk/guidance/register-a-trust-as-a-trustee.


How to apply for a Bare Trust account with HL

  1. Ensure you agree to our terms by reading the Terms and Conditions with Tariff of Charges (PDF), Key Features (PDF) and the Key (Investor) Information Documents for any investments you have chosen.
  2. Download our application to open a Fund and Share Account for a Bare Trust by clicking on the ‘Open a Bare Trust’ link below.
  3. Return the following:

    • Completed ‘Apply for an HL Fund and Share Account for a Bare Trust’ form
    • Identity document for the beneficiary
    • Cheque or completed Direct Debit mandate
    • If opening an account for an existing Bare Trust, a copy of the ‘Evidence of the trust’s registration’ document from the Trust Registration Service (TRS)
    • Copy of a completed Bare Trust Deed, or similar document used to establish the Bare Trust – a template deed is provided by Hargreaves Lansdown or you can use your own (we’re sorry our template is not suitable for Scottish residents).

  4. Return to us by printing and posting or by scanning and emailing. You can find our address on the front of the application form.


What happens after I’ve applied?

  • Once we receive your application, we’ll aim to process the application within 10 working days, placing any investment instructions you’ve provided.
  • We’ll send the lead trustee a confirmation letter and temporary PIN, allowing them to register for online access so the trustees can manage the account.
  • You’ll need to register any new trusts with the Trust Registration Service (TRS) within 90 days of being set up and send evidence of the trust registration to HL.

Due to the legal and tax implications associated with creating a trust, we recommend you take financial, legal and tax advice on the suitability of a Bare Trust for your circumstances before opening the account with Hargreaves Lansdown. You must ensure that creating a Bare Trust is appropriate for your circumstances. Hargreaves Lansdown shall not be responsible if the Trust fails in its purposes or is not suitable for your circumstances.

More information on trusts is available from: https://www.gov.uk/trusts-taxes.

OPEN A BARE TRUST

Help and support

If you have any questions about Bare Trusts, you can speak one of our client support experts by calling us on 0117 900 9000.

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