What is a bare trust?
A bare trust holds assets for a named beneficiary who is absolutely entitled to them. The trustees have no discretion — they simply hold the assets until the beneficiary calls for them. In England and Wales the beneficiary can demand them outright at 18; in Scotland the age is 16.
It is the simplest trust there is, and a common route for grandparents putting money aside for grandchildren. Income and gains are taxed on the beneficiary rather than the trust, which usually means their own personal allowances apply.
A gift into a bare trust is a potentially exempt transfer, so it falls out of the estate after seven years — unlike most other trusts, where the gift is chargeable immediately.
The catch is that there is no flexibility at all. At 18 the beneficiary can take the money and spend it however they wish, whatever the settlor intended. Where a parent funds a bare trust for their own minor child, the parental settlement rules can also tax the income back on the parent.