If you’re considering an inheritance trust fund, you’re likely hoping to make life simpler for your loved ones and avoid future complications. Trusts can feel daunting, but with a bit of planning and clear steps, you can set one up that genuinely works for your family. This guide is designed for regular British citizens, not legal experts, and aims to demystify the process with relatable examples, practical solutions, and a few gentle warnings to help you sidestep common pitfalls.

What is an inheritance trust fund—and why might you need one?

A trust is a legal arrangement where you (the settlor) transfer assets to trustees, who then manage those assets for the benefit of your chosen beneficiaries. The trust deed sets out the rules, and the trustees must follow them. Trusts are especially useful if you want to:

• Delay access to money until a child is older (say, 21 or 25).

• Provide for someone in stages, rather than a lump sum.

• Protect family wealth from impulsive spending, creditors, or relationship breakdowns.

• Manage sensitive family situations, such as remarriage, blended families, or vulnerable beneficiaries.

Types of trusts you might consider:

• Bare trust: Simple and straightforward. The assets belong to the beneficiary, who can demand them at 18. Good for straightforward gifts, but less control.

• Interest in possession trust: Someone (often a spouse) gets income from the assets now, with the capital passing to someone else (often children) later.

• Discretionary trust: Trustees have flexibility to decide who gets what, when, and how much, within your guidance. Useful for complex or changing family circumstances.

Step-by-step: how to set up an inheritance trust fund

1. Define the purpose in plain English

Start by writing down, in your own words, why you want the trust and what you hope it will achieve. For example:
“Support Sam with university costs and a first-home deposit; protect the rest until age 25.”
This clarity will guide every later decision and help trustees understand your intentions.

2. Choose trustees you’d trust with your bank card

Pick two or three people who are practical, organised, and calm under pressure. You can also appoint a professional trustee, but this adds cost. Trustees should understand what’s expected, how decisions are made, and how to keep records.
Tip: Have an honest chat with your chosen trustees before you commit. Make sure they’re willing and understand the responsibility.

3. Draft a simple trust deed

The trust deed is the legal document that sets out the rules: who the beneficiaries are, what powers the trustees have, how and when money can be used, and how trustees can be replaced.
A solicitor can draft this efficiently, but keep it readable. Add a “letter of wishes” in plain English to guide trustees on judgement calls. For example, you might say, “Prioritise education and housing costs, but consider travel or health needs if they arise.”

4. Open a trust bank or investment account

The trust will need its own account. For cash, a trustee bank account works. For longer-term trusts, consider a diversified investment account in the trustees’ names as trustees of the trust.
Providers will ask for the trust deed, so keep it handy.
Example: If you’re setting up a university fund, you might open a savings account and an investment account to grow the fund over time.

5. Transfer the assets in

Move the cash, investments, or property into the trust account. For property or shares, you’ll need to complete transfer paperwork and may need help to avoid unexpected tax or charges.
Watch out: Transferring property can trigger stamp duty or capital gains tax, so check before you act.

6. Start light-touch record-keeping

Keep copies of the trust deed, letters of wishes, bank statements, and trustee meeting notes. Record any distributions and the reason for them.
Annual summaries make filling out forms like R185 (trust income) much easier later.
Tip: Set up a shared digital folder for trustees to keep everything organised.

Realistic UK scenarios

• University fund for a niece: You and a sibling set up a discretionary trust with clear guidance to pay tuition and a rent top-up from investment income. A letter of wishes explains priorities if markets fall.

• Blended family: You leave your spouse an income for life from a rental property via an interest in possession trust, with the capital passing to your children later. The deed spells out maintenance obligations.

• Sensible access for a keen 18-year-old: Instead of a bare trust that flips to the child at 18, you set an age condition in a discretionary trust, releasing set amounts at 21, 23, and 25.

Watch-outs and practical workarounds

Charges and admin: Provider and legal costs can add up.
Workaround: Keep the trust’s scope tight, use a short deed, and centralise documents in a shared folder for trustees.

Tax basics: Different trusts are taxed differently. Discretionary trusts, for example, have their own rates and bands.
Workaround: Keep clear records of income and expenses, and use form R185 to show who received what.

Too many trustees: Five trustees can stall decisions and create confusion.
Workaround: Pick two or three trustees and name reserves in case someone steps down.

Vague wishes: “Use it wisely” isn’t enough.
Workaround: Write specific examples—education, deposit, equipment for a trade—and set clear priorities.

Changing circumstances: Life changes, and so might your wishes.
Workaround: Review your trust deed and letter of wishes every few years, especially after major life events.

What to do next

• Write the purpose and beneficiaries in your own words.

• Sound out your preferred trustees—confirm they’re willing and understand the role.

• Get a short trust deed drafted and add a simple letter of wishes.

• Open a trust account and move the first amount in.

• Set a monthly 10-minute slot for notes and receipts so R185 is easy later.

Gentle reminder

This article is general information for the UK. It isn’t legal, financial, or tax advice. Your situation and goals are unique—keep simple notes so decisions are easy to explain later. Setting up a trust is a thoughtful way to support your family, but it’s worth taking the time to get it right. If you’re unsure, keep asking questions and don’t rush. Your future self—and your loved ones—will thank you for it.