TL;DR: Putting a house into a trust in the UK transfers legal ownership of the property from an individual to trustees, who hold it for the benefit of named beneficiaries. The decision has significant inheritance tax, capital gains tax, stamp duty and care-home assessment consequences, most of which are negative for the average UK family. The lifetime gift of a house to a trust is usually a chargeable lifetime transfer for inheritance tax (with an immediate 20 percent charge on amounts above the nil-rate band), can trigger capital gains tax even though no money has changed hands, and only protects against care-home fees in narrow circumstances and almost never if the deliberate-deprivation rules apply. For most families, simpler arrangements (a properly drafted will, a lasting power of attorney) achieve more of the intended objective than a complex lifetime trust. Trusts have legitimate uses but should not be set up without specialist advice.
Last reviewed May 2026
"Putting a house in trust" is a phrase that covers several different legal arrangements, each with very different tax and practical consequences. The arrangements range from a will trust (created on death by a will) to a lifetime trust (created during the settlor's lifetime by transferring the property to trustees), and from a bare trust (where the beneficiary has an absolute right) to a discretionary trust (where the trustees decide).
This guide covers the main types of trust used in UK property arrangements, the inheritance tax position on lifetime transfers to trust, the capital gains and stamp duty consequences, the limited protection against care-home fees, the position on continuing to live in the property, and the alternatives that achieve some of the same goals without the trust framework.
Types of trust used for property in the UK
A bare trust holds the property for a beneficiary who has an absolute right to it. The trustees hold legal title; the beneficiary holds equitable title. The beneficiary is treated as the owner for tax purposes. Bare trusts are simple but have limited planning utility.
A life-interest (or interest-in-possession) trust gives one beneficiary the right to enjoy the property during their lifetime (the "life tenant"), with the property passing to other beneficiaries on the life tenant's death. Life-interest trusts created in a will are common: the spouse takes the property for life, the children inherit on the spouse's death. Lifetime life-interest trusts are less common because the tax treatment differs.
A discretionary trust gives the trustees discretion over which beneficiaries (from a defined class) benefit and to what extent. Discretionary trusts have flexibility but face the most demanding inheritance tax regime: a chargeable lifetime transfer on the way in, periodic 10-year charges, and exit charges when assets leave the trust. A discretionary trust over a house is therefore a serious commitment.
An interest-in-possession trust created during the settlor's lifetime is, since 22 March 2006, treated for tax in the same way as a discretionary trust (the so-called "relevant property" regime). Will-trusts get a more favourable treatment because they are created on death.
Inheritance tax on a lifetime transfer to trust
Transferring a house into a trust during the settlor's lifetime is a chargeable lifetime transfer (CLT) for inheritance tax (IHT), with the value above the available nil-rate band (currently 325,000 pounds, with possible additional residence nil-rate band of 175,000 pounds for transfers to direct descendants but the residence nil-rate band rules around trusts are complex) taxed at 20 percent. If the settlor dies within 7 years, additional tax of up to 40 percent may apply.
The property is removed from the settlor's estate on transfer (subject to the 7-year survival), so successful transfers reduce the IHT exposure on the settlor's later death. The "gift with reservation of benefit" rules, however, claw the property back into the estate if the settlor continues to enjoy the property (such as continuing to live in it rent-free) after the transfer. This is a major trap.
The trust itself then faces periodic 10-year charges of up to 6 percent of the value of the trust assets above the nil-rate band, plus exit charges when assets leave. Over a long period, these add up. A house in a discretionary trust is an inheritance tax planning instrument that often costs more in tax over time than leaving the house in the settlor's estate to pass on death.
Capital gains tax and stamp duty consequences
Transferring a property to a trust during the settlor's lifetime is a disposal for capital gains tax (CGT) purposes, even though no money has changed hands. The disposal is treated as being at market value, and any gain (market value minus the settlor's original purchase price plus allowable costs) is subject to CGT at the residential property rate (currently 24 percent or 18 percent depending on the settlor's income band) after the annual exempt amount.
Holdover relief (a deferral of the CGT until the trust eventually disposes of the property) is available on transfers to a discretionary trust or where the transfer is also a chargeable lifetime transfer for IHT. The relief means the CGT is not paid immediately, but the trust takes the property at the settlor's original cost, and the gain is realised on a later disposal by the trust.
Stamp Duty Land Tax can apply where the transfer involves consideration (for example, the trustees taking on an existing mortgage debt). A pure gift of an unencumbered property to a trust is not normally a SDLT chargeable transaction, but the rules are complex and a solicitor should check the specific case. The Scottish (LBTT) and Welsh (LTT) equivalents work similarly.
Care-home fees: the deliberate-deprivation trap
A common motivation for putting a house in trust is to protect it from being assessed for care-home fees if the settlor later needs residential care. Local authorities in England, Wales and Northern Ireland assess capital and income above defined thresholds when deciding who pays for care. Scotland operates a different framework with free personal care above a defined threshold.
Local authorities have a specific power to treat assets that were transferred away in order to reduce a care-home assessment as "deliberate deprivation" of assets. Under this rule (drawn from the Care Act 2014 in England and similar legislation elsewhere), the local authority can assess the settlor as if the asset were still owned, regardless of the legal transfer. There is no fixed look-back period; the local authority looks at the timing and the settlor's motivation.
Putting a house in trust to avoid care-home fees is therefore a high-risk strategy. If the local authority decides the transfer was deliberate deprivation, the protection fails. The strategy can succeed where the transfer is for genuine non-care-home reasons and the timing predates any reasonable expectation of care, but the bar is high.
Continuing to live in the property: the reservation of benefit issue
Many lifetime trust arrangements over a house involve the settlor continuing to live in the property. This raises two problems. The first is the inheritance tax "gift with reservation of benefit" rule: if the settlor continues to enjoy the property without paying full market rent to the trust, the property is treated as remaining in the settlor's estate for IHT purposes, defeating the IHT planning objective.
The second is the pre-owned assets tax (POAT) under Finance Act 2004 Schedule 15, an annual income tax charge on the deemed benefit of using property previously owned. POAT was introduced to close certain IHT loopholes and applies a market rental value to the use of the property, with the settlor's actual rent deducted, and the net taxed as income. The combination of gift with reservation and POAT means that most "transfer the house to a trust and keep living there" arrangements do not achieve the intended tax outcome.
Workarounds exist (the settlor paying full market rent to the trust, the property being commercially let elsewhere) but are complex and require careful structuring. A specialist trust solicitor and tax adviser should design and document the arrangement.
Will trusts: a different and often better approach
A will trust is created on the settlor's death by their will. The property is transferred to trustees who hold it under the terms of the will. Will trusts have significant advantages over lifetime trusts: the inheritance tax position is established on death (typically benefiting from the spouse exemption if the surviving spouse is a life tenant), capital gains tax is reset to market value on death so there is no CGT to pay on the transfer, and the deliberate-deprivation issue does not arise.
A common will-trust arrangement gives the surviving spouse a life interest in the family home (so the survivor can continue to live there for life), with the children inheriting on the survivor's death. This protects against, for example, the survivor remarrying and leaving the home to a new spouse, while providing the survivor security of occupation. The will should be drafted by a STEP-qualified solicitor to ensure the trust is structured correctly.
A property protection trust (sometimes called a "severance of joint tenancy" arrangement) is a variant where joint owners change their ownership from joint tenancy to tenancy in common, and each leaves their half-share in a will trust on first death. The intention is that the deceased's share goes into trust rather than passing automatically to the survivor; the survivor has a life interest, but the deceased's share is protected for the children. This is a legitimate planning tool with limited care-home protection in specific cases.
When a lifetime trust might still make sense
Lifetime trusts have legitimate uses despite the tax complexity. They can be appropriate where: the settlor has a large estate well above the nil-rate band and the IHT charges on the trust route are still less than the IHT on the estate; the settlor wants to provide for a vulnerable beneficiary who cannot manage assets directly (a disabled beneficiary trust has favourable IHT treatment); the assets are non-residential (commercial property, business assets, investment portfolios) where business property relief or agricultural property relief reduces the IHT cost; or the family has specific governance needs around the property (a family holiday home with multiple beneficiaries).
For each of these cases, the answer comes from analysing the specific family circumstances rather than applying a generic "put the house in trust" recommendation. The advice should come from a STEP-qualified solicitor, a chartered tax adviser, or both. The Society of Trust and Estate Practitioners (STEP) maintains a directory of qualified practitioners.
How we verified this
This article reflects the Inheritance Tax Act 1984 (as amended) for the trust IHT regime, the Finance Act 2006 changes to the "relevant property" regime, the Care Act 2014 for the deliberate-deprivation rules, the Finance Act 2004 Schedule 15 for the pre-owned assets tax, HMRC's trusts and estates manual, and the published guidance from the Society of Trust and Estate Practitioners (STEP). Specific rates, allowances and thresholds change at each budget and the linked GOV.UK pages hold the current position.
Disclaimer: This article is general information about putting a UK house into trust and is not personal legal or tax advice. Trust arrangements have significant inheritance tax, capital gains tax, stamp duty and care-home assessment consequences. Anyone considering such an arrangement should take advice from a STEP-qualified solicitor and a chartered tax adviser before transferring property.
Frequently asked questions
Can I put my house in trust to avoid inheritance tax?
A lifetime transfer of a house to a trust is a chargeable lifetime transfer for inheritance tax, with an immediate 20 percent charge on values above the nil-rate band, plus further charges if the settlor dies within 7 years. The trust then faces periodic 10-year charges and exit charges. Over time, the trust route often costs more in inheritance tax than leaving the property in the estate. A will trust on death is usually more efficient for inheritance tax planning.
Does putting my house in trust protect it from care-home fees?
Usually not. Local authorities have a power under the Care Act 2014 (and equivalent legislation elsewhere in the UK) to treat assets transferred to avoid care-home assessment as "deliberate deprivation" and assess the settlor as if the asset were still owned. There is no fixed look-back period. The strategy can only work where the transfer predates any reasonable expectation of needing care and is made for genuine non-care reasons.
Can I live in a house after putting it in trust?
Yes, but the inheritance tax "gift with reservation of benefit" rules treat the property as remaining in the settlor's estate for IHT purposes unless the settlor pays full market rent to the trust. The pre-owned assets tax also charges income tax on the deemed benefit of using the property. These rules largely defeat the IHT planning purpose of a lifetime transfer where the settlor continues to live in the property.
What is a property protection trust?
A property protection trust is an arrangement where joint owners sever their joint tenancy, become tenants in common (each owning a defined half-share), and each leaves their share in a will trust on first death. The surviving spouse gets a life interest in the deceased's share, with the share passing to the children on the survivor's death. The arrangement provides limited protection against the survivor's later marriage and (in specific cases) some protection against care-home fees on the survivor's later assessment.
Should I get legal advice before putting my house in trust?
Yes. Trust arrangements have major tax and practical consequences, and the right structure depends on the family's specific circumstances. A STEP-qualified solicitor and a chartered tax adviser can model the inheritance tax, capital gains tax, stamp duty, and care-home implications, and propose a structure that achieves the intended objectives. Generic online trust deeds are rarely appropriate for property.
