A bare trust, also known as a simple trust, is a legal arrangement in which a trustee holds and manages assets on behalf of a beneficiary. Unlike other types of trusts, a bare trust provides the beneficiary with a direct and absolute interest in the trust property, including both income and capital. The trustee’s role is limited, and they typically have little discretion over how to manage the trust assets.

Key features and aspects of a bare trust include:

1. **Direct Ownership:**
– In a bare trust, the beneficiary has direct ownership of both the income and the capital of the trust. The trustee holds legal title to the assets, but the beneficiary has the right to the use, enjoyment, and income generated by those assets.

2. **Limited Trustee Powers:**
– The trustee’s powers in a bare trust are usually limited. They are obligated to follow the instructions or wishes of the beneficiary regarding the management and disposition of the trust property. Unlike discretionary trusts, where the trustee has more flexibility, the trustee of a bare trust must act in accordance with the beneficiary’s rights.

3. **No Discretionary Powers:**
– Unlike discretionary trusts, where the trustee has discretion in distributing income and capital among beneficiaries, a bare trust has no such discretion. The beneficiary is entitled to the income and capital, and the trustee cannot exercise discretion in this regard.

4. **Beneficiary’s Rights:**
– The beneficiary has the right to call for the transfer of the trust property into their name at any time. The trustee is obligated to transfer legal ownership to the beneficiary upon request.

5. **Common Uses:**
– Bare trusts are often used in situations where a legal owner (trustee) holds property for the benefit of a specific individual (beneficiary), and the beneficiary is intended to have direct and absolute control over the assets. This can be seen in various contexts, such as property ownership, investments, or inheritance planning.

6. **Tax Considerations:**
– In some jurisdictions, the tax treatment of bare trusts may differ from other types of trusts. Income generated by the trust property is often taxed directly in the hands of the beneficiary, as the beneficiary is considered the true owner of the assets.

7. **Termination:**
– A bare trust may terminate when the beneficiary reaches a certain age or meets other specified conditions. Upon termination, the legal title is transferred to the beneficiary, and they gain full control over the assets.

8. **Legal Formalities:**
– While bare trusts are generally simpler than some other types of trusts, legal formalities are still important. The trust agreement should clearly outline the rights and responsibilities of the trustee and beneficiary, and the transfer of assets should be properly documented.

Bare trusts are straightforward legal arrangements that provide a transparent structure for holding and managing assets on behalf of a beneficiary. They are often used when the settlor (the person creating the trust) wants to ensure that the beneficiary has direct and unequivocal control over the trust property. Legal advice is recommended when establishing a trust to ensure that it aligns with the specific needs and intentions of the parties involved.