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A bare trust (also called a simple trust or naked trust) is a legal arrangement where one person (the trustee) holds assets—like money, property, or investments—for someone else (the beneficiary).
Although the trustee looks after the assets, the beneficiary owns them completely. The trustee’s job is to manage the assets until the beneficiary is legally entitled to take full control—typically at the age of 18.
The Beneficiary Owns the Assets:
The assets belong to the beneficiary from the start.
The trustee simply manages or safeguards them.
No Power for the Trustee:
The trustee cannot decide how or when to distribute the assets.
They must follow straightforward instructions tied to the trust.
Taxes Are Paid by the Beneficiary:
Any income tax or Capital Gains Tax (CGT) on the assets is the beneficiary’s responsibility.
The trustee does not pay these taxes.
Exit Tax:
An Exit Tax (currently 41% in Ireland) applies when assets are transferred or sold. Planning ahead for this tax is important.
Irreversible Transfers:
Once assets are placed in a bare trust, they belong to the beneficiary.
The person who set up the trust (the settlor) cannot take the assets back.
Bare trusts are simple and flexible, making them a popular choice in many situations. Here are some common examples:
Holding Assets for Children:
Parents or guardians often use bare trusts to hold savings or property for children until they turn 18.
Managing Investments:
A bare trust can hold shares or investments for someone else, like in a nominee arrangement.
Planning for the Future:
Bare trusts can help with estate planning, ensuring a smooth transfer of assets after someone passes away.
Small Gift Exemptions:
You can use a bare trust to give up to €3,000 per year to someone (like your child) without affecting their inheritance tax threshold.
Bare trusts are one of the simplest ways to protect or manage assets for someone else. Unlike other types of trusts, there are no complex rules about how the assets must be used. The beneficiary has clear and full rights, and the trustee’s role is straightforward: to look after the assets until the beneficiary takes ownership.
A bare trust allows one person to hold or manage assets for another. It’s easy to set up, simple to manage, and provides full transparency. Whether it’s for safeguarding assets for children, simplifying estate planning, or managing investments, bare trusts offer flexibility and clarity.
If you’re looking for a no-fuss way to manage or pass on assets, a bare trust could be the ideal solution.