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Legal Terms - Bare Trust
A bare trust, also known as a naked trust or simple trust, refers to a legal arrangement where the trustee holds property on behalf of the beneficiary without any additional obligations or responsibilities. A discretionary trust is a type of trust in which the trustee has no obligations other than to keep the trust property for an adult beneficiary who is legally competent and to manage the trust property according to their own discretion.
Directed by the recipient (in contrast to an active trust). A bare trustee is essentially a nominee.
The capital gains tax liability is incurred by the beneficiary rather than the trustee when assets are held in a bare trust. According to the law, a trust is considered a bare trust for the purpose of capital gains tax if the beneficiary has the sole authority to request the transfer of the property to themselves, with the condition that they fulfill any remaining financial obligations or legal claims. (However, please refer to the cases of Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 (Ch), Crowe v Appleby [1975] 1 WLR 885, and Booth v Ellard [1980] STC 555).
In the context of taxation, a bare trust may exist when property is held on behalf of an individual who is either an infant or an adult without mental capacity. Nevertheless, in order for a property to be considered as held on a bare trust, the beneficiary's inability (due to either age or mental state) must be the sole reason for their lack of absolute entitlement (Tomlinson v Glyn's Executor and Trustee Co [1980] 45 TC 607).
A bare trust, also known as a naked trust or simple trust, refers to a legal arrangement where the trustee holds property on behalf of the beneficiary without any additional obligations or responsibilities. A discretionary trust is a type of trust in which the trustee has no obligations other than to keep the trust property for an adult beneficiary who is legally competent and to manage the trust property according to their own discretion.
Directed by the recipient (in contrast to an active trust). A bare trustee is essentially a nominee.
The capital gains tax liability is incurred by the beneficiary rather than the trustee when assets are held in a bare trust. According to the law, a trust is considered a bare trust for the purpose of capital gains tax if the beneficiary has the sole authority to request the transfer of the property to themselves, with the condition that they fulfill any remaining financial obligations or legal claims. (However, please refer to the cases of Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 (Ch), Crowe v Appleby [1975] 1 WLR 885, and Booth v Ellard [1980] STC 555).
In the context of taxation, a bare trust may exist when property is held on behalf of an individual who is either an infant or an adult without mental capacity. Nevertheless, in order for a property to be considered as held on a bare trust, the beneficiary's inability (due to either age or mental state) must be the sole reason for their lack of absolute entitlement (Tomlinson v Glyn's Executor and Trustee Co [1980] 45 TC 607).
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