Financial planning is about much more than building wealth. It’s about protecting what you’ve worked hard to achieve, providing for your loved ones and ensuring your financial affairs are structured in a way that reflects your wishes. One strategy that can play an important role in achieving these objectives is the use of a bare trust. While not appropriate for everyone, a bare trust can provide certainty, flexibility and peace of mind when incorporated into a well-designed financial plan.

What is a Bare Trust?

A bare trust is one of the simplest forms of trust arrangement. It allows assets to be held by trustees on behalf of a named beneficiary. The trustees are responsible for managing the assets until the beneficiary becomes entitled to them under the terms of the trust.

How Does It Fit Into Wealth Planning?

Wealth planning is often built around four key pillars:

1. Protection
2. Investment
3. Retirement Planning
4. Legacy Planning

A bare trust sits within the legacy planning pillar.

Legacy Planning

For many people, leaving a financial legacy isn’t just about the amount they leave behind; it’s about making the transfer as straightforward as possible. In practice, a bare trust can help provide clarity around who should benefit from the proceeds of a policy and can form part of a broader estate planning strategy.

Benefits of a Bare Trust

Depending on individual circumstances, potential benefits may include:

• Clearly identifying who will benefit from the policy proceeds.
• Helping trustees administer the proceeds according to the trust terms.
• Providing certainty about the intended beneficiaries.
• Supporting broader family and succession planning objectives.

A bare trust provides a clear legal structure for holding assets on behalf of a named beneficiary. By identifying beneficiaries in advance, it can form part of a broader estate and succession planning strategy, helping individuals organise their affairs in a structured and thoughtful way.

A Practical Example

Grandparents John and Mary want to put money aside for their 3-year-old granddaughter, Lily, to help towards her first home in the future. They open a designated investment account under a bare trust.

How the Arrangement Works:

• The Role of Trustees: John and Mary manage the account, choose where to invest the money, and control the fund.
• The Role of Beneficiary: Lily is the legal owner of the money from day one, even though she cannot touch it yet.
• The Rules: John and Mary cannot change their minds, cancel the trust, or take the money back for themselves once it is put in.
• The Outcome: Once Lily turns 18, she becomes fully entitled to the assets held in the trust. At that point, the trustees must transfer full ownership and control of the account to her.

Is a Bare Trust Right for Everyone?

Not necessarily. Every family has different circumstances, objectives and estate planning needs. Whether a bare trust is appropriate depends on factors such as family structure, financial goals and the type of protection in place. This is why trusts should always be considered as part of a comprehensive financial planning conversation rather than in isolation.

Effective financial planning isn’t simply about accumulating wealth; it’s about protecting it, growing it, enjoying it and ultimately passing it on in the most efficient way possible. Like any financial planning strategy, the right solution will depend on your personal circumstances. Seeking professional financial advice can help ensure your protection, retirement and legacy plans work together as part of one cohesive financial strategy.

Written by Aaron Cunningham, Wealth Consultant