You might have heard of a trust savings account, but what is it? A trust savings account is actually a specialist type of bank or building society account designed to hold money on behalf of someone else and managed by another party. This provides a safe and regulated place to hold assets while following the rules set out in the trust.

Whilst many people hear the term trust, very few are sure how it works in practice. This guide aims to explain the basics of trust savings accounts in clear terms so that you know whether it is something that will work for you.

This article is for general information only and does not replace professional legal or financial advice. Always speak to a qualified advisor before making decisions about trust accounts.

What is a trust savings account?

A trust savings account is an account that belongs to a trust as a legal entity, not to an individual trustee. The trustee will control and manage the money within the trust, but only for the benefit of the beneficiaries.

The trustee is the person or people who are legally responsible for managing the money, whilst the beneficiary is the individual or group who will benefit from those funds. There should also be a trust document or legal structure that sets out the rules for how money is managed, used or distributed.

It is important to remember that trusts can vary greatly depending on personal goals such as inheritance planning, care provision or safeguarding money for children. This makes professional advice essential to ensure the right setup.

How do trust savings accounts work?

A trustee is responsible for opening and operating a trust savings account. The funds that are kept within it are ring-fenced for the beneficiaries and cannot legally be used for personal purposes by the trustees. It is the trustees who make decisions on how and when the funds can be accessed within the limits of the trust deed. Money within a trust account legally belongs to the trust and not to the trustee personally, which protects it from claims against a trustee’s personal assets. Trustees cannot use the money for their own purposes, and any misuse can be legally challenged by the beneficiaries.

Banks and building societies will need proof of the trust deed and details of all trustees before they will allow the account to be opened. It is also essential that trustees act jointly unless the deed states otherwise. Trustees have certain responsibilities and must act in accordance with the trust deed, which sets out the rules for managing, investing and distributing the funds. Decisions will often require multiple trustees’ signatures in order to prevent fraud or mismanagement.

Trust accounts will allow trustees to invest the funds in things like savings accounts, fixed-term deposits or low risk investments. Any withdrawals are limited by the trust deed, and must benefit the named beneficiaries. It is important to remember that the trustees are accountable for every single transaction that takes place.

Record keeping is another important aspect of trust savings accounts, as the trustees are required to maintain detailed accounts of all deposits, withdrawals and interest earned. Accurate records are essential for tax reporting, audits and ensuring transparency for beneficiaries. Providers will perform checks to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. The trustees, therefore, need to provide identification and details of the beneficiaries when opening the account.

How your trust operates may be affected by tax law, inheritance rules or the specific type of trust. Tailored advice from a solicitor or financial planner is therefore essential.

What are the different types of trust savings accounts?

When placing money into a trust, there are several types of savings accounts that trustees can choose from depending on the objectives of the trust, the level of flexibility required, and how soon the funds may need to be accessed.

Easy access trust savings accounts allow trustees to withdraw money at any time without penalties. These accounts are often used when funds may need to be accessed regularly to meet ongoing costs or provide support to beneficiaries. The interest rate is usually variable and can be lower than other types of accounts, but the flexibility can be beneficial for day-to-day management.

Fixed rate trust savings accounts lock the funds away for a set period (for example 1, 2 or 3 years) in exchange for a higher, guaranteed rate of interest. These types of accounts are suitable when the trustees do not need immediate access to the capital and want to grow the trust’s funds over the medium to long term. However, early withdrawals are usually restricted or subject to penalties.

Notice accounts offer a middle ground between easy access and fixed rate options. Trustees can access the money, but must give advance notice, such as 30, 60 or 90 days, before making a withdrawal. The interest rate is typically better than easy access accounts while still offering some degree of flexibility.

Some providers may also offer regular saver accounts for trusts, where the trustees contribute a set amount monthly. These can help gradually build the trust’s capital over time and may come with preferential interest rates, although monthly deposit limits usually apply.

Additionally, while standard Cash ISAs are generally restricted to individuals, some providers offer ISA-style tax-efficient products for specific trust arrangements. These can be advantageous for longer-term capital preservation when the trust structure permits their use. Availability and eligibility vary, so professional guidance is advised.

Selecting the right type of savings account for a trust will depend on how the funds are intended to be used, the likely duration of the investment, and the level of access required. Trustees must also meet their legal responsibility to manage the trust’s assets responsibly, which involves choosing an account that appropriately balances security, potential returns and ease of withdrawal for the benefit of the beneficiaries.

What do you need to open a trust account?

In order to open a trust account, you will need a number of different documents, including an original or certified copy of the trust deed and the proof of identity and address for all trustees. This deed is used to set out the terms of the trust, powers of trustees and the rights of the beneficiaries. Trustees must provide photo ID in the form of a passport or driving licence, as well as proof of address. They must be over the age of 18 and legally competent to act.

It is also important to supply details of the beneficiaries. This will include their name and in some cases their date of birth or age if it is considered relevant. The provider may also request confirmation that all beneficiaries are accounted for in the trust deed.

Providers will have their own requirements and so some providers may set a minimum opening balance which can range from as low as £10 up to several thousand pounds. Other providers might require more than one trustee to authorise withdrawals for security purposes. Providers will also perform their own compliance checks, such as AML and KYC checks on trustees and ask for details of anticipated transactions or source of funds.

The role of the trustee is very important and so they should be chosen carefully. They have a legal responsibility for managing the account in the best interests of the beneficiaries, so they need to be someone that is trusted and reliable.

Your chosen provider can explain its account requirements, but a solicitor should review or draft your trust documents to make sure that they meet legal requirements and provider standards.

Who should consider a trust savings account?

Trust savings accounts are not for everyone and so they require some careful thought and planning. People often choose to open them if they are planning for children or dependants or aim to preserve their wealth across generations. They are also used for protecting assets for vulnerable or elderly family members or to ensure charitable or community purposes are properly managed.

The suitability of a trust savings account will depend on the individual situation. Whether your goal is safeguarding family wealth or providing for a loved one’s future, a qualified financial advisor can help you to decide if a trust account is right for your circumstances.

Is a trust savings account right for you?

Trust accounts provide security and legal structure and can involve multiple parties who are required to follow strict rules. They are very useful in helping to manage wealth responsibility, but they are not suitable for every situation.

Setting up a trust savings account can offer peace of mind, but it is a decision that requires professional advice. You should always consult a solicitor or financial advisor before proceeding.

Disclaimer: This article is for information purposes only and does not constitute legal or financial advice. Mansfield Building Society does not provide advice on the suitability of trust savings accounts. Please consult a qualified professional to ensure any trust account meets the needs of your trust and its beneficiaries.