Trusts in focus: Why advisers are rethinking estate planning ahead of the 2026 IHT changes

February 24, 2026

With significant inheritance tax (IHT) changes on the horizon and growing client interest in estate planning, trusts are firmly back in the spotlight. In this article for IFA Magazine, Niamh Austin, Solicitor in the Tax & Trusts team at Wilsons Solicitors, explores why trust planning has surged in recent months, how upcoming reforms to APR and BPR are influencing client behaviour, and shares practical tips on the key technical considerations advisers must weigh up before recommending a trust structure.

Trusts are a good way to remove assets from a client’s estate where they do not want to make an outright gift. Lifetime giving can ultimately reduce the inheritance tax on death, especially those made more than seven years before death as these transfers become exempt.

There are a number of reasons why a trust might be a sensible option for a family. These include:
• age of the recipient,
• the financial sophistication of the recipient,
• concerns about marital or financial difficulties the recipient may face,
• the client not wanting to lose complete control of the assets,
• flexibility as to who and how to benefit, and
• tax planning purposes.

Why trusts are back in the spotlight

There has been a recent spike in trust registrations, and a lot of these could be due to the changes announced in recent Budgets such as the upcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).

Property which qualified for 100% APR and BPR relief currently passes free of inheritance tax. However, the Government have announced that from 6 April 2026 there will be a limit to the 100% relief. This was first announced in October 2024 as being a limit of £1,000,000 per person with the limit not being transferrable between spouses and civil-partners. In November 2025, the Government announced it would be transferrable and later increased the limit to £2,500,000 per person.

This means that 100% relief on APR and BPR assets for a couple has reduced to £5,000,000. Before 6 April 2026, clients are able to settle qualifying assets into trust above this limit without incurring a chargeable lifetime transfer charge. Because of this, many clients with qualifying property in excess of £1,000,000 have been implementing estate planning structures, including trusts, since around October 2024.

Beyond the APR/BPR relief, clients have their £325,000 nil-rate band and they can settle up to this amount without incurring a chargeable lifetime transfer charge. This £325,000 renews every seven years. This means that a couple can settle up to £650,000 into trust every seven years without incurring inheritance tax charges on the transfers into the trust.

The discussions around recent Budgets have also prompted many clients to think more broadly about their estate planning, often leading them to consider establishing a family trust.

Choosing the right trust structure

In addition, many clients are finding that their children are now financially secure, allowing them to pass assets to the next generation. However, grandchildren may be minors or financially inexperienced, meaning gifts may need to be structured via a trust.

The common types of trusts which clients are setting up are:
• bare trusts for the benefit of their minor grandchildren;
• discretionary trusts for the benefit of their descendants; and
• discretionary trusts for the benefit of their estate beneficiaries (settled with an assignment of a life insurance policy).

Clients can also give beneficiaries set interests such as a life interest (an entitlement to income or occupation of the trust assets, but not the capital), although this has become less common since the post-2006 tax changes affecting such trusts.

Key technical and practical considerations for advisers

There are a number of issues advisers will need to get right when recommending a trust structure. Some of the main aspects to consider include:

The beneficiaries: who the client wants to benefit and the implications of this (for example, including children’s spouses and the potential impact in the event of divorce).
The type of trust that fits the client’s wishes: should beneficiaries have fixed interests (such as a right to income or occupation) or should it be discretionary?
Potential tax consequences for the settlor, including settlor-interested rules and reservation of benefit provisions.
Whether the trust falls under the relevant property regime and whether this has been properly factored into the overall estate planning advice.
Whether a trust is genuinely more beneficial than an outright gift.
Whether the trust document contains sufficient administrative powers for trustees.
Who should act as trustees.
Whether the size and income of the trust fund can justify the cost of professional trustees, if appointed.
The ongoing administration and compliance requirements, including TRS registration, trust bank accounts and FATCA/CRS reporting.
Whether any individual will hold additional powers (such as appointing or removing trustees or adding beneficiaries), and the tax or reporting implications of those powers.
The client’s understanding that trusts require ongoing review in light of legislative and reporting changes.

If a financial adviser feels that any aspect of trust planning falls outside their expertise, it is prudent to consult a specialist, particularly where trust structures are not part of their regular advisory work.