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Can I setup bare trust myself?

Tax | Inheritance Tax Helpful? 44

Asked by Rekrap, submitted 17 October 2012.

Open Quote Can I setup a Bare Discounted Gift Trust without using an intermediary? Simple passing on of monies to two children but I would like to manage the investment fund myself and make changes as necessary. Where can I find appropriate wording for the the Trust document?End Quote

Answered by Justin on 22 October 2012

Yes, you can.

However, for something that should be straightforward bare trusts cause an immense amount of confusion with little definitive guidance on what you actually need to do to set one up. Some fund managers/platforms/brokers provide a form and some don't. And HMRC doesn't require notification via the usual 41G trust form, but does state you need to write to them with details. In practice I doubt many people are doing this correctly and I also doubt HMRC cares that much - this is hardly the preferred route for big tax evaders.

If you want to write your own I'd use this Abbey form as a template (it may be an old form, but the wording remains valid). Then send a letter to your tax office informing them.

Bear in mind that placing the investments in a bare trust means they're taxable as the child's and count as a gift (both likely positive), although the child can't take ownership until they're 18.

Another, potentially simpler, option would be to use Junior ISAs. These avoid the hassle of trusts, are not taxable and can't be accessed by the child until age 18. The annual contribution limit is currently £3,600 per child, which may be split between cash and investments. However, there's a slight complication if any of your grandchildren already have a child trust fund (CTF), as this means they can't open a Junior ISA. CTFs will likely be merged into Junior ISAs at some point, meanwhile existing CTFs may also be topped up by up to £3,600 a year.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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