Technical article

Is a Gift into a Family Trust Taxed the Day I Make It? United Kingdom, Germany and Ireland

A gift to a trust is taxed only when it is complete.

By Neil Solomon · 4 min read

Imagine a parent who wants to move GBP 1 million (approximately US$1.3 million) into a family trust for the children, as an example. Nothing has been spent. The trust is a way of holding the money for them. Does the tax office treat that move as a taxable event on the day it happens?

In several countries it does. The table shows what the sources give for six places.

United Kingdom. The UK tax office's manual says the charge on entry is half the death rate of 40%, which is 20% for a trust of the usual discretionary kind. On the example, GBP 675,000 sits above the band, and 20% of that is GBP 135,000 (approximately US$175,000), assuming the settlor's band is unused. If the settlor dies within seven years, extra tax can be due by recalculation. The 20% and the GBP 325,000 band are confirmed by the government's threshold page and a secondary guide.

Germany. A lifetime transfer to a foreign pool of assets set up to bind them is a taxable gift. German practitioners put the entry gift in the third class, with an allowance of EUR 20,000 (approximately US$22,000), 30% up to EUR 6 million (approximately US$6.6 million) and 50% above it. That placement is a tier C reading, since the statute's rule that looks through to the closest relative is written for family foundations in Germany. On EUR 1 million, 30% after the allowance is about EUR 294,000. If the settlor keeps free power over the assets, with the right to revoke, instruct or take them back, there is no tax at setup because the trust is treated as transparent.

Ireland. The Irish Revenue's Discretionary Trust Tax is a 6% once-off initial charge, and a 1% charge each 31 December on the value of all trust assets. The form is due within four months of setting up. A 2009 commentary finds that a trust with a non-Irish settlor, non-resident beneficiaries, no Irish property and Irish professional trustees may owe no Irish tax.

United States. A gift to a trust is taxed only when it is complete. If the donor keeps certain powers, the gift can be incomplete. The first US$15 million per person is sheltered for 2026.

Cayman and Bermuda. Cayman charges no income, capital gains, estate or inheritance tax. Bermuda charges no tax on gifts received by trusts and no stamp duty on the deed. Bermuda's stamp duty applies to Bermuda land and Bermuda-dollar assets. That Bermuda guide is from 2019, so the law may have moved since.

You might say: "A tax on the way in sounds like a tax on doing the right thing for my children." The tax is on the transfer, and the trust is the form. The same gift made straight to an adult child would be taxed under that country's gift rules. A direct gift to a child in the UK falls under the seven-year rule, while a gift into most trusts is charged on entry. In Germany a child's closeness to the giver puts the child in the lowest-rate class, and the entry gift to the trust is read in the third class.

You could look at what the settlor keeps. In Germany, keeping control can move the tax from the day of the gift to the day of death. In the US, certain retained powers keep the gift incomplete.

If you have put assets into a family trust, what was the first tax bill you met? Share it here, because someone planning the same gift may benefit from your story.

Figures are estimates for planning, based on public data. Date read: October 2026.