Guide to Bare Trusts in Ireland: Simple Wealth Transfer That Actually Works

Setting money aside for your child’s future shouldn’t feel like navigating a maze of complex regulations. That’s where bare trusts come in—they’re arguably the most straightforward way to transfer wealth whilst keeping your family’s financial planning both tax-efficient and legally sound.

But what exactly is a bare trust, and how can it benefit your family’s long-term financial strategy? Let’s break it down in plain terms.

What is a Bare Trust?

A bare trust is a simple trust —a legal arrangement where a trustee holds assets on behalf of a beneficiary. Think of it as a financial holding pattern: the trustee manages the assets, but the beneficiary has the absolute right to everything in the trust.

With a bare trust, there’s no ambiguity about ownership. The beneficiary has full control over the trust assets once they reach the age of 18. No discretion involved—it’s their money, plain and simple.

Here’s the catch (because there’s always one): a bare trust cannot be revoked once established. Those assets cannot be reclaimed by the settlor. It’s a one-way street, which makes careful planning absolutely essential before you set up a bare trust.

The Players: Who Does What in a Bare Trust?

The Settlor

The settlor is the person who establishes the trust and transfers assets into it. Usually, this is a parent or grandparent looking to benefit a child or grandchild. Once you’ve made the transfer, though, that’s it—you can’t change your mind later.

The Trustee

The trustee’s role is to manage the assets on behalf of the beneficiary until they turn 18. They hold assets but must act in the beneficiary’s best interests. Often, parents act as trustees for their children’s bare trusts, giving them control over investment decisions whilst the child is still young.

The trustee holds and manages the assets, but they’re essentially caretakers. They’re responsible for managing the trust fund sensibly until the beneficiary reaches adulthood.

The Beneficiary

The beneficiary is entitled to the assets and gains full control over the trust assets when they reach 18. Importantly, the beneficiary is responsible for any tax obligations arising from the trust—more on this shortly.

Once a child turns 18, they gain full control, whether they’re financially mature or not. This absolute right is both a strength and potential weakness of bare trusts.

How Irish Families Use Bare Trusts

Making the Most of Gift Allowances

The most popular use? Maximising the small gift exemption. Each person can give a gift of money worth up to €3,000 per year to any individual without triggering Capital Acquisitions Tax. This means both parents can contribute €6,000 annually to their child’s bare trust, whilst grandparents and others can also use the small gift exemption to add their own contributions.

Over 18 years, that’s potentially €108,000 from parents alone—all transferred tax-free whilst preserving the family’s inheritance tax threshold for future use.

House Deposit Savings

With property prices continuing to climb, helping your child with a house deposit has become a significant financial commitment. A bare trust allows parents to steadily build a deposit fund, taking advantage of compound growth over many years.

Investment Growth Strategies

Assets in a bare trust can be invested on behalf of the beneficiary, potentially growing significantly over 18 years, and understanding Investment Growth Strategies includes managing maturing investments within a trust. Parents often select more aggressive investment strategies than they might for their own portfolios, given the longer time horizon.

Tax Implications: What You Need to Know

Understanding the tax implications is crucial—both for maximising benefits and avoiding unexpected liabilities.

Capital Acquisitions Tax (CAT)

The good news is that Budget 2025 increased the CAT thresholds significantly. For gifts from parents to children (Group A), the threshold has risen from €335,000 to €400,000. For other relationships (Group C), it’s increased from €16,250 to €20,000. These increases apply to gifts or inheritances received on or after 2nd October 2024.

Any amount above these tax thresholds is subject to CAT at 33%—but only on the excess amount.

Here’s where bare trusts become particularly attractive: the small gift exemption doesn’t count against these thresholds. You can give €3,000 per year, every year, without using up any of your child’s €400,000 lifetime allowance.

Capital Gains Tax (CGT)

If assets held in a bare trust are sold for a profit, it’s usually the beneficiary who is liable for any Capital Gains Tax that may be due. For children with little other income, this can actually be beneficial, as they may be able to use their annual CGT exemption. Whether an asset falls under CGT or not depends on the type of instrument it is. For example, a direct shareholding will be subject to CGT.

Income Tax

Income generated by trust assets is typically taxed as income of the beneficiary, not the trustee. The beneficiary is responsible for declaring any income received from the trust on their own personal tax return.

For young children with minimal other income, this often means the income falls within their standard rate band or personal allowance. Filing returns for income-generating assets can add an extra layer of costs and complexity.

Exit Tax Considerations

One area requiring careful planning involves investments subject to exit tax. Irish-domiciled investment funds and certain life insurance policies face exit tax at 41% on growth. This can significantly impact returns, so it’s worth consulting an advisor about structuring investments to minimise this liability.

The Advantages and Disadvantages

The Benefits of a Bare Trust

Tax benefits are the primary attraction. By utilising tax exemptions like the small gift exemption, families can transfer substantial wealth whilst minimising gift tax exposure. The bare trust is used to preserve CAT thresholds for larger future transfers.

Simplicity matters too. Unlike complex discretionary trusts, bare trusts are straightforward. There’s no ongoing administrative burden, and the legal arrangement is relatively simple to establish.

Flexibility in timing allows parents to build wealth gradually rather than making large one-off transfers that might trigger tax liabilities.

The Disadvantages

Irrevocability is the big one. Once assets are placed in a bare trust, they cannot be reclaimed by the settlor. If your financial circumstances change dramatically, you can’t access those funds.

Loss of control happens when the child reaches 18. Unlike discretionary trusts where trustees retain some discretion, a bare trust automatically transfers full control over the trust assets to the beneficiary on their 18th birthday.

This can be problematic if the beneficiary isn’t mature enough to manage large sums responsibly. Some 18-year-olds handle money well; others might blow through their inheritance faster than you’d expect.

Setting Up a Bare Trust in Ireland

The Process

Setting up a bare trust requires careful planning, but the process itself isn’t overly complex:

Choose your trustee carefully. Often, parents act as trustees, but you could appoint other family members or professionals. The trustee will be responsible for managing assets until the beneficiary reaches the age of 18.

Draft the legal arrangement. This outlines the terms of the trust, specifying who the beneficiary is and when they’ll gain full control over the assets. Most life companies offer standard trust documents that can be used.

Transfer assets into the trust. This is the point of no return—once transferred, assets are held on behalf of the beneficiary and cannot be reclaimed.

Ensure compliance with Irish trust law. The trust must meet all legal requirements and ongoing obligations, including proper record-keeping and tax reporting.

Most families benefit from consulting with a qualified advisor to navigate trust taxation in Ireland and ensure everything is structured correctly from the start.

Documentation and Compliance

The Revenue Commissioners require proper documentation and ongoing compliance. Trust structures must be managed correctly to avoid any issues with Irish trust law compliance.

Keep detailed records of all transactions, including when assets are transferred into the trust and any income or gains generated. The beneficiary has responsibilities for reporting income and gains once they reach 18.

Alternatives to Consider

Discretionary Trusts

Discretionary trusts in Ireland offer more flexibility than bare trusts, allowing trustees to maintain control over distributions even after beneficiaries reach adulthood. However, they’re more complex to administer and may be subject to different tax treatment.

Family Partnerships

A family investment partnership in Ireland can be an effective alternative for families with substantial wealth or those involved in property investment structures. These companies offer more control and can be useful for business succession planning in Ireland.

Pension Provision

While you can’t establish a pension for a child directly, there are other ways to help with their retirement planning. Some parents prefer to focus on maximising their own pension contributions and using inheritance planning to transfer wealth later.

Life Insurance Trust Arrangements

These can be particularly effective when combined with bare trusts, providing both investment growth and life insurance protection. The structure allows for tax-efficient wealth transfer whilst maintaining some insurance coverage.

Making the Right Choice for Your Family

Bare trusts are ideal for families seeking a straightforward, tax-efficient method to transfer wealth while utilising annual gift exemptions. They’re particularly suitable if you’re comfortable with the beneficiary gaining control at 18 and don’t need access to the funds yourself.

However, they’re not right for everyone. If you might need the money back, or if you’re concerned about giving an 18-year-old full control over substantial assets, alternatives like discretionary trusts might be more appropriate.

The beauty of a bare trust lies in its simplicity and tax efficiency. For families who can live with its limitations, it remains one of the most effective ways to transfer wealth across generations whilst keeping the Revenue Commissioners happy.

Ready to explore whether a bare trust could benefit your family? Our financial advisors specialise in Irish inheritance tax planning and can help you navigate the options that work best for your specific circumstances. We’ll guide you through the process with honest, straightforward advice—because your family’s financial future deserves nothing less.

Get in touch today for a no-obligation consultation and discover how we can help secure your family’s financial future.