What happens to a lifetime trust when the settlor dies?

The trust continues. Because the assets are legally owned by the trust — not the settlor personally — they do not form part of the estate for probate purposes. The trustees continue to manage and distribute the assets in accordance with the trust deed. The settlor's death may trigger specific provisions in the deed (such as a fixed entitlement for a surviving spouse), but the trust itself does not end unless the deed provides for termination.

Can I change a lifetime trust after it is created?

It depends on the type of trust and what you want to change. Some trusts are irrevocable — once created, the settlor cannot take assets back or fundamentally alter the terms. Others include powers of amendment. A trust protector, where one is appointed, may also have powers to amend the trust. Any variation should be handled by a solicitor experienced in trust law.

Lifetime Trust UK: What It Is, How It Works, and Whether You Need One

A lifetime trust — sometimes called a living trust or an inter vivos trust — is one of the most powerful estate planning tools available to UK families. Unlike a will, which only takes effect when you die, a lifetime trust operates from the moment it is created. Assets inside it are protected, managed, and distributed according to your instructions from day one. But a lifetime trust is only as strong as the record behind it. This guide explains what a lifetime trust is, how it works in practice, and what you need to do to ensure it holds up when it matters most.

What Is a Lifetime Trust?

A lifetime trust is a legal arrangement created by a living person — the settlor — during their own lifetime. The settlor transfers assets into the trust, appointing trustees to manage those assets for the benefit of named or described beneficiaries. The trust deed sets out the terms under which trustees must act.

The defining feature of a lifetime trust is its immediacy: it takes effect on the date it is executed, not on the settlor's death. This makes it fundamentally different from a will trust, which only springs into existence once probate is granted.

How Does a Lifetime Trust Work?

The settlor creates a trust deed — a legal document that defines the trust's terms, names the trustees and beneficiaries, and sets out the trustees' powers. Once the deed is signed, witnessed, and dated, the trust exists as a separate legal entity.

Assets are then transferred into the trust. This is called settling assets. Cash is transferred by payment; property requires a deed of transfer and Land Registry registration; shares require stock transfer forms. Each transfer must be documented.

Lifetime Trust vs Will: What Is the Difference?

The most fundamental difference is timing. A lifetime trust operates from the moment of creation. A will trust only activates after the testator dies — and only after probate has been granted, which can take months or, in complex estates, years.

A lifetime trust also avoids the probate process entirely for the assets it holds. Because those assets are legally owned by the trust — not the settlor personally — they do not form part of the deceased's estate for probate purposes. This means the trust can continue to function, and distributions can be made, without waiting for probate.

Who Should Consider a Lifetime Trust?

Lifetime trusts are not appropriate for every family — but they are the right structure for a substantial number of situations that a standard will cannot adequately address.

Families with blended or complex structures benefit from a lifetime trust's precision. You can define which assets are held for which beneficiaries, and under what conditions — something a will cannot do with the same degree of control during your lifetime.

Frequently Asked Questions

What is a lifetime trust in the UK?

A lifetime trust — also called a living trust or inter vivos trust — is a legal arrangement created by a living person (the settlor) that takes effect immediately, not on death. The settlor transfers assets to trustees to hold and manage for named beneficiaries, under the terms of a trust deed.

Is a lifetime trust the same as a living trust?

Yes. 'Lifetime trust', 'living trust', and 'inter vivos trust' all refer to the same concept: a trust created and operative during the settlor's lifetime. 'Living trust' is more commonly used in American legal terminology; 'lifetime trust' and 'inter vivos trust' are more typical in UK practice.

How much does it cost to set up a lifetime trust in the UK?

Solicitor fees for drafting a lifetime trust deed typically range from £1,500 to £5,000 depending on complexity. There may also be SDLT on any property transferred, CGT implications, and IHT entry charges if the value transferred exceeds the settlor's nil-rate band. Ongoing costs include trustee accounting fees and trust tax returns.

Does a lifetime trust avoid inheritance tax?

Not automatically. Transfers into a discretionary lifetime trust are chargeable lifetime transfers for IHT purposes. If the value exceeds the nil-rate band, a 20% entry charge applies. The trust is then subject to ten-year periodic charges. However, a well-structured lifetime trust can form part of a broader IHT planning strategy — specialist advice from a tax solicitor is essential.