To simplify, a Bare Trust is a trust where there are no beneficiaries. The trust is a mechanism whereby assets are transferred to the trustee (or trustees) to be managed on behalf of the trust. In a bare trust there is no beneficiary, the person setting up the trust (known as the Settlor) is the only person who benefits from the assets held in the trust. The Settlor to a bare trust can be an individual or a company.The Settlor may set up the bare trust for their own benefit, for example, to hold the proceeds of a house sale. The Settlor may also wish to hold the bare trust property on behalf of others. For example, if the Settlor has children who have not yet come into their inheritance or have come into it late, they can set up a bare trust to hold their inheritance on their behalf.Although a bare trust is legal and valid, it is not regarded as a very sensible option and is therefore rarely used. If you are considering setting up a bare trust, you should seek professional advice first.Bare trusts are usually used to allow the Settlor to take advantage of certain tax exemptions and concessions. If you are considering setting up a bare trust it is important to seek professional advice from a qualified tax adviser.The trust is set up in writing (a deed) and signed by the Settlor and the trustee(s) that will hold the assets for the benefit of the beneficiaries. The deed may include any restrictions on the use of the assets in the trust and how they will be dealt with upon the death of the Settlor or any beneficiary. The deed should also set out who will be entitled to receive any income generated by the assets in the trust.
