A trust is not automatically the “safe” place to put a child’s share of a lottery win, and it is not automatically the most tax-efficient answer. It is a legal structure for managing assets. For some families that structure is exactly what they need; for others, simpler routes such as a Junior ISA, direct support or good will planning may do the job more cleanly.
GOV.UK describes a trust as a way of managing money, investments, land or buildings for people. The person putting the assets into the trust is the settlor. The trustees become the legal owners and manage the assets under the trust terms. The beneficiaries are the people who may receive income, capital or both. The useful question after a big win is therefore not “should every child have a trust?” but “do we need this separation of ownership and decision-making for a particular reason?”
The old version of this page leaned heavily on “bad timing, bad influence and bad decisions”. That is not necessary. A parent may simply want to avoid making a very large outright transfer while a child is young, keep several children within one long-term family arrangement, provide continuity if the parents die, or give trustees flexibility to respond to future needs. None of those goals requires negative assumptions about the child.
Keep major financial decisions with adults while children are still growing and learning about money.
Some trusts let trustees respond differently as education, housing, disability, family circumstances or opportunities change.
A properly drafted structure can continue to operate if parents die or are no longer able to manage the family plan themselves.
A trust deed can separate family intentions from ad-hoc gifts and make clear who has authority to make decisions.
Choose the closest goal and the level of flexibility you think you need. The result suggests a route worth discussing, not a legal recommendation or a trust you should create yourself.
For simple long-term child saving, compare a Junior ISA before creating a bespoke trust.
GOV.UK lists several trust categories, including bare trusts, interest in possession trusts, discretionary trusts and accumulation trusts. The rights and tax rules differ substantially, so the trust type matters more than the label “family trust”.
The trustee holds legal title, but the beneficiary is entitled to the capital and income.
Depending on the deed, trustees can decide who receives trust income or capital, how much, how often and with what conditions.
The beneficiary is entitled to trust income as it arises, after expenses, while capital can ultimately pass elsewhere under the trust terms.
A will can create a trust so assets are managed after a parent dies. That can be more appropriate than transferring lottery money into a lifetime trust immediately.
Some trusts for disabled people or bereaved children can qualify for specific tax treatment if statutory conditions are met.
Accumulation, mixed, settlor-interested and non-resident trusts all have their own rules. They are usually specialist territory rather than a starting point for a family webpage.
In a bare trust, the beneficiary already has the beneficial entitlement. GOV.UK says they can require the assets once they reach 18 in England and Wales or 16 in Scotland. That makes a bare trust potentially simple and useful, but it is very different from a discretionary arrangement where trustees keep decision-making powers.
You genuinely want the assets to belong to that child, are comfortable with their legal entitlement at the relevant age, and mainly need an adult to hold/manage the assets while they are young.
If your real intention is “the trustees should decide whether and when to make substantial payments after age 18”, a bare trust does not provide that ongoing discretion.
GOV.UK says discretionary trustees may be able to decide what is paid, which beneficiary receives it, how often and what conditions apply. A family might value that flexibility simply because nobody can predict in 2026 what three children will need in 2036.
One child may attend university, another train through an apprenticeship and another need specialist study or support.
One child may need a deposit in their twenties while another may already have housing and need no support at that stage.
New children, disability, bereavement, businesses, relocation and other needs can appear long after the original win.
Trustees must act within the trust's legal terms. GOV.UK says they are the legal owners, manage the trust day to day, pay tax due and use or invest assets under the settlor's instructions in the deed or will.
A trust can be the right answer, but MoneyHelper notes that trusts often add paperwork and tax costs and are not always necessary. Matching the simplest structure to the actual purpose is usually better than starting with complexity.
| Route | What it is good at | When the child owns/accesses it | Main planning question |
|---|---|---|---|
| Pay a cost directly | Education, travel, training or another defined expense. | No separate pot necessarily created for the child. | Do you need to transfer ownership at all? |
| Direct gift | Simple outright transfer to an adult child or another person. | Immediately belongs to the recipient. | Are you genuinely comfortable giving up ownership now? |
| Junior ISA | Long-term tax-free saving/investing for an under-18. | Belongs to child; control at 16, normal withdrawal at 18. | Is the £9,000 2026/27 annual limit enough for the goal? |
| Bare trust | Holding assets that are absolutely the child's while they are young. | Claimable at 18 England/Wales or 16 Scotland. | Are you comfortable with that absolute entitlement? |
| Discretionary trust | Flexible decisions across beneficiaries and changing circumstances. | No single automatic access rule; depends on deed and trustee powers. | Is the flexibility worth the extra tax/admin complexity? |
| Will / will trust | Planning what happens if a parent dies without transferring assets today. | Depends on the will/trust terms and applicable law. | Is the real concern succession rather than a lifetime gift? |
First decide the scale and purpose of support using How Much Money Should You Give Your Children?. Only then decide whether the money should be held directly, in an account, through a trust or retained within the parents' own plan.
Trustees are not ceremonial names on a document. GOV.UK says they legally own trust assets, manage the trust, pay tax due and decide how to invest or use assets within the trust's rules. That can be a long-term administrative and decision-making role.
Will they keep records, meet deadlines, read advice and stay engaged years after the initial excitement of setting up the trust?
Can they make decisions consistently across children and changing family circumstances rather than simply agreeing to every request?
Think about age, health, geography and succession. A structure intended to last decades needs a realistic route for replacing trustees.
A family trustee may understand relationships and values exceptionally well, which can be useful in a discretionary arrangement.
A professional trustee can add independence and administration expertise, but will normally charge for the role.
If there are several trustees, decision-making becomes much easier when roles, communication and disagreements have been considered in advance.
STEP describes a letter of wishes as informal, non-legally binding guidance that can help trustees understand how a settlor hoped discretionary powers would be used. The trust deed remains the legal framework; the letter can explain the family thinking behind it.
Tax should be understood before funding the trust, but it does not need to dominate the family conversation. The main point is that different trust types are taxed differently, and a discretionary trust can have a very different tax profile from a bare trust.
For 2026/27, trustees of accumulation and discretionary trusts generally pay 45% on non-dividend income and 39.35% on dividend-type income above the applicable trust tax-free amount. GOV.UK says that amount is normally £500, although it can be divided where a settlor has multiple trusts.
Trusts can also pay Capital Gains Tax when assets are disposed of at a gain. For 2026/27, the normal trust annual exempt amount is £1,500; a qualifying vulnerable-beneficiary trust can have a £3,000 allowance.
A lifetime transfer into a relevant-property trust can be an immediately chargeable transfer. The ordinary IHT nil-rate band is currently £325,000, but previous chargeable transfers and the exact structure affect how much is actually available. The lifetime rate on chargeable value can be 20%.
Many discretionary trusts fall within the relevant-property regime. Where tax is due, the ten-year anniversary rate can be up to 6%, with proportionate charges when relevant property leaves the trust. The calculation depends on the trust's history.
Before moving a large sum, an adviser needs to know the trust type, settlor's previous transfers, beneficiaries, residence, assets and purpose. The tax position should be worked out before the transfer, not discovered afterwards.
HMRC published a new trust-registration checker in June 2026. Many UK express trusts must register on the Trust Registration Service even when they have no tax liability, unless an exclusion applies. Taxable trusts usually have registration obligations too.
A trust can need to register even when no current tax is due. The Trust Registration Service also supports anti-money-laundering transparency requirements.
HMRC says many non-taxable trusts created after 6 October 2020 must register within 90 days. Taxable-trust deadlines depend on when tax liability arises.
Trustees may need to update HMRC when details change, keep financial records and complete trust tax returns where required.
A trust that lasts 20 years is a 20-year administration commitment. Build ongoing legal, accounting, investment and trustee costs into the comparison rather than treating setup as a one-off event.
GOV.UK provides special rules for certain trusts benefiting disabled people and bereaved children. Where the statutory conditions are met, special Income Tax, Capital Gains Tax and Inheritance Tax treatment can apply. This is a specialist area where the child's long-term support, benefits and legal capacity may all matter.
The tax definition of a vulnerable beneficiary is not simply “someone the family wants to protect”. It uses defined disability and bereavement criteria.
Assets intended for a vulnerable beneficiary may need to be ring-fenced and used within specific statutory limits for special treatment to apply.
MoneyHelper notes that trusts can be particularly relevant where a child has a learning disability or mental-health condition and may need long-term financial management.
A trust for a disabled child can be a fundamentally different planning problem from setting aside part of a lottery win for an otherwise financially independent child. It deserves its own specialist advice rather than being copied from a sibling's arrangement.
HMRC uses “18-to-25 trust” for a specific IHT category involving bereaved young people, generally created under a deceased parent's will, intestacy or certain compensation arrangements. A living lottery winner cannot simply call a normal trust an “18-to-25 trust” and receive those special rules.
Describe that outcome to the solicitor rather than choosing a trust name yourself. The right legal drafting depends on whether you want fixed rights, trustee discretion, one beneficiary, a class of beneficiaries, lifetime planning or a will structure.
A child can reach adulthood with a beautifully drafted trust and still have very little experience budgeting, saving or making decisions. Keep the trust plan alongside ordinary financial education. The Allowance Strategy for Wealthy Families is designed for that everyday side of the family plan.
A teenager may be ready to understand that a family structure exists long before they need to know every asset value or future distribution.
Everyday budgets, savings goals and earned income provide practical learning before trustees or beneficiaries are discussing major capital.
“We created a structure to manage family wealth carefully” is very different from “we put your money away because we do not trust you”.
Should Children Know You’re Wealthy? covers when to talk about family wealth, exact amounts, privacy and how that conversation can develop as children get older.
A flexible family structure can recognise different needs while still following a clear principle. The important work is deciding what “fair” means before trustees are being asked to make decisions under emotional pressure.
Simple to understand and sometimes exactly what parents want, particularly for outright or fixed gifts.
Support may differ in timing or type while aiming to give each child comparable opportunities in education, housing or work.
A discretionary structure can respond to different circumstances, but trustees need a clear family purpose and good records.
A letter of wishes or wider family record can help explain why trustees have discretion and how parents thought about fairness. It should guide rather than attempt to secretly rewrite the legal trust deed.
You do not need to know the legal answer yet. These are the practical questions worth answering first.
Education, housing, general support, inheritance, disability support, multigenerational wealth or something else?
If the parents can simply retain the assets and pay future costs directly, a lifetime trust may not be necessary yet.
This distinction is central to the difference between bare/fixed arrangements and discretionary planning.
Decide whether each child needs a separate fixed entitlement or whether trustees should be able to respond across a family group.
Do not use “18-to-25 trust” or another label before explaining the practical result you are trying to achieve.
Think about reliability, administration, judgement, continuity and whether professional involvement adds value.
The structure should remain workable even when a parent, relative or professional trustee retires, dies or becomes unable to act.
Check IHT on entry, ongoing Income Tax/CGT and periodic/exit charges before moving a large amount.
Include tax returns, accounts, investment advice, trustee fees and legal updates where relevant.
Most express trusts now need a Trust Registration Service check, including many with no immediate tax liability.
Plan communication and financial education rather than waiting until a beneficiary asks for a large distribution.
Lifetime trusts, wills, pensions, property and the parents' own remaining estate should form one coherent plan.
The amount, the child's financial education and the parents' wider estate all matter just as much as the legal wrapper.
UK-focused answers on trust types, access, trustees, tax, registration, Junior ISAs and family communication.
This page uses current HMRC/GOV.UK guidance for trust types, trustee responsibilities, Income Tax, Capital Gains Tax, Inheritance Tax and Trust Registration Service rules, plus MoneyHelper and STEP guidance for practical trust planning. Trusts are legal arrangements, so a real family structure should be drafted and checked for the relevant UK jurisdiction.