What Is a One Family Trust Fund?
If you’re wondering, what is a one family trust fund?, you’re not alone. It’s a question many UK families ask when exploring ways to protect wealth and pass assets to future generations. In simple terms, a one family trust fund is a legal arrangement where assets are held by trustees for the benefit of a single family.
This article will break down how these trusts work, why families choose them, and how they can be a powerful estate planning tool in the UK. You’ll also learn about their tax implications, setup process, and how to ensure everything is compliant with UK law.
Need tailored guidance? Book a free consultation with MP Estate Planning to find out how a family trust could help you protect your estate.
What Is a One Family Trust Fund in the UK?
A one family trust fund is a specific type of discretionary trust that holds money, property, or investments for the benefit of members within a single family. It’s usually set up to help manage or protect wealth over the long term, particularly for children or vulnerable relatives.
The trust is governed by a legal document called a trust deed. This names the trustees (who manage the assets), the beneficiaries (who benefit from the trust), and the rules under which the trust operates.
Key Features of a One Family Trust Fund
- Assets are held and controlled by trustees
- Only family members are named as beneficiaries
- The trust can last for up to 125 years (or less if stated)
- Trustees decide how and when beneficiaries receive money
This structure gives families a high level of control and protection—especially useful for future inheritance planning.
Why Set Up a One Family Trust Fund?
There are many reasons why families choose to set up a trust for their family alone. Below are some of the main benefits:
1. Protecting Family Wealth
Placing assets into a trust helps protect them from risks like divorce, bankruptcy, or poor money management by individual family members.
2. Estate and Inheritance Tax Planning
While a trust doesn’t automatically avoid Inheritance Tax (IHT), it can help you reduce or delay liability if structured properly. Trusts can also help you control how assets are passed on without giving up ownership during your lifetime.
To explore inheritance tax options, visit our Inheritance Tax Planning page.
3. Supporting Children or Vulnerable Family Members
One family trust funds are often used to support children, grandchildren, or relatives with disabilities—without giving them full access to large sums of money upfront.
How to Set Up a One Family Trust Fund
Setting up a trust fund in the UK requires careful legal drafting and planning. Here are the key steps:
- Choose the type of trust (usually a discretionary or interest-in-possession trust)
- Select your trustees—these are the people who’ll manage the assets
- Write the trust deed, stating the trust’s rules and beneficiaries
- Transfer the assets into the trust
- Register the trust with HMRC via the Trust Registration Service (TRS)
You should always work with a solicitor or estate planning expert to ensure your trust complies with the law and avoids unintended tax consequences.
Need help starting the process? Book a call today for expert support.
How Are One Family Trust Funds Taxed?
UK family trusts are subject to specific tax rules, depending on the type of trust and the value of the assets involved. Here are the main considerations:
- Inheritance Tax (IHT): Most lifetime transfers into trust are classed as “Chargeable Lifetime Transfers” and may incur IHT if over the nil-rate band (£325,000 as of 2024).
- 10-Year Charge: Every 10 years, the trust may pay up to 6% IHT on assets above the threshold.
- Capital Gains Tax (CGT): If the trust sells assets, CGT may be due, though some allowances apply.
- Income Tax: Income generated in the trust (from rent, dividends, etc.) may be taxed at the trust rate (up to 45%) depending on how it’s distributed.
Proper planning can help reduce these costs. Our fixed-fee estate planning packages include expert tax guidance tailored to your needs.
Who Controls a One Family Trust Fund?
The trust is run by trustees. These could be family members, professionals, or a combination of both. Trustees are legally obligated to act in the best interest of the beneficiaries and in accordance with the trust deed.
Don’t Confuse Trustees with Beneficiaries
The person who sets up the trust—called the settlor—chooses the trustees and the beneficiaries. Trustees manage the assets, while beneficiaries benefit from them, but they don’t automatically get direct access or ownership.
This setup ensures control and flexibility while reducing the risks of misuse or asset loss.
Real-Life Example of a One Family Trust Fund
Meet the Walkers. They want to pass on their home and savings to their two children without handing everything over at once. They set up a one family trust fund to:
- Transfer part of their property into the trust
- Appoint their solicitor and eldest child as trustees
- Specify that the children receive money at age 25
This allows the Walkers to manage their assets now while planning for the future. And if one of their children goes through a divorce later on, the assets inside the trust remain protected.
Is a One Family Trust Fund Right for You?
If you want to:
- Protect your estate from care fees or future claims
- Control when and how your children inherit
- Reduce inheritance tax exposure
…then a one family trust fund could be a smart move. But it’s not right for everyone, and mistakes can be costly without expert advice.
Key Takeaways
- A one family trust fund is a trust created solely for members of one family
- It helps manage wealth, reduce tax, and protect assets
- Professional help is essential for compliance and success
- It’s a legal and flexible way to secure your legacy
Want to learn more about how trusts can protect your estate? Visit our page on Care Fees Protection or read our guide on What is a Trust Fund?.
Conclusion
So, what is a one family trust fund? It’s a flexible, powerful estate planning tool that helps families manage their wealth, protect their children’s futures, and navigate UK inheritance rules more effectively. Whether you’re a parent, grandparent, or caring for a vulnerable loved one, a one family trust could offer peace of mind and legal protection.
Book a free consultation with MP Estate Planning to see how a trust could benefit your family today: mpestateplanning.uk/book-a-consultation