Trusts in Estate planning: how they can help protect multi-generational wealth
14 September 2026
Passing wealth between generations involves more than deciding who should inherit. Families may also want to consider when assets should be passed on, how they should be managed in the meantime and whether younger beneficiaries are ready to take full responsibility for them. This is where trusts can play an important role.
As part of the estate planning process, trusts can give families greater control over how wealth is managed and transferred over time. While trusts are often discussed in relation to tax, they can also provide flexibility over when beneficiaries receive assets, help preserve wealth for future generations and support longer-term goals across generations. Used as part of a wider financial plan, trusts can help families pass on wealth on in a way that reflects their circumstances and priorities.
Tax Treatment
Tax Treatment
The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
What is a trust and how does it work?
A trust is a legal arrangement that allows assets to be held and managed for the benefit of another person or group of people. There are three main roles involved: the settlor is the person who puts assets into the trust, the trustees are responsible for managing those assets according to the terms of the trust, and the beneficiaries are the people who are intended to benefit from the assets.
For example, a grandparent may place money or investments into a trust for their grandchildren. The trustees would then manage those assets in accordance with the terms of the trust. Rather than transferring wealth directly, a trust creates a structure around how the assets are managed and when beneficiaries can access them.
While trusts can offer a number of benefits, it is also worth considering how they may be taxed. Depending on the type of trust and its circumstances, income, dividends and capital gains may be subject to different tax rates from those applying to individuals. Certain trusts may also face periodic inheritance tax charges, including at ten-year anniversaries. The tax treatment, costs and administration involved will depend on the type of trust and the individual circumstances, so professional advice can help when deciding whether a trust is appropriate.
Different trusts for different circumstances
There are several types of trusts that may be relevant to individuals and families, depending on what they are trying to achieve. A bare trust is one of the simplest forms, where assets are held by trustees for a named beneficiary, who becomes entitled to them once they reach the relevant age.
A discretionary trust gives trustees greater flexibility. Depending on the terms of the trust, they may be able to decide which beneficiaries receive money, how much they receive and when distributions are made. An interest in possession trust, meanwhile, can allow one beneficiary to receive income from the trust while the underlying assets are preserved for somebody else in the future.
There are also trust arrangements that can allow the settlor to retain access to some or all of the capital, which may be attractive to people who want to plan for the future without giving up access entirely.
For example, a Discounted Gift Trust can provide the settlor with regular payments while the remaining assets are held for beneficiaries, while a Loan Trust involves lending money to a trust that can be repaid to the settlor over time. These arrangements can form part of inheritance tax planning, although their suitability and tax treatment will depend on individual circumstances.
The right structure will depend on the family's circumstances, who the trust is intended to benefit and how much flexibility or control they want to retain over the assets
The advantages of trusts within estate planning
One of the main advantages of a trust is the control it can give families over how and when wealth is passed on. Leaving assets directly to a beneficiary can mean giving them immediate access and responsibility, whereas a trust can allow those assets to remain under the management of trustees until a particular time or stage in life.
This can be especially useful for younger beneficiaries. Parents or grandparents may want to set money aside for children or grandchildren without giving them unrestricted access to a significant amount at a young age. Trusts can also help protect family wealth by keeping assets within a structure that is managed according to agreed terms.
Another potential advantage is flexibility. Certain trusts can allow trustees to respond to changing family circumstances rather than requiring all assets to be distributed in the same way at the same time. This can be particularly useful where families are thinking about wealth across several generations.
Tax Treatment
Tax Treatment
The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Supporting family goals at the right time
Trusts can also help families use wealth to support specific goals. Education is one example, with parents or grandparents potentially wanting to set aside money for school or university costs while retaining some control over when those funds become available.
Depending on how the trust is structured, assets can be managed over time and released when a beneficiary reaches a particular age or stage, such as starting university. This can help families match financial support with moments when it may have the greatest impact.
The same approach can be used for other long-term goals. A trust might be used to support younger generations at key stages of life while keeping the remaining assets managed for the future. This is one of the broader advantages of a trust in estate planning: it allows families to think not only about who should receive wealth, but also when and how that wealth should be used.
Trusts as part of the wider estate plan
Before making a financial gift, careful consideration should be given to its long-term affordability, including whether gifting assets could affect future income requirements, overall financial security or the ability to meet later-life costs, such as long-term care.
Trusts should not usually be considered in isolation. A family's wider financial position may also include wills, pensions, investments and property, each of which can play a different role in how wealth is managed and eventually passed on. Estate planning therefore works best when trusts are considered alongside those other elements and the family's broader objectives. This can help ensure that each arrangement supports the family’s overall goals rather than operating in isolation.
Trust planning with Killik & Co
At Killik & Co, our Wealth Planning team work alongside our Trust Services team can advise on the creation and ongoing management of trusts, whether the aim is to preserve wealth for future generations or manage an existing trust. Our specialists can help identify the most suitable type of trust, create it by deed or will, and provide ongoing support with its administration and relevant tax considerations. Working alongside your Adviser and wider Wealth Planning team, this helps ensure any trust forms part of your broader financial objectives.
You may also like...
Sign up to our newsletter
Sign up to receive the latest news from Killik & Co, including our Market Update and Killik Explains educational videos, and be one of the first to hear about upcoming events and webinars. You can unsubscribe at any time and learn how we use your data in our Privacy Policy.