Family trusts have long been a cornerstone of wealth planning. For property-owning families, they promise continuity, protection from disputes, and smoother succession across generations. A trust can help preserve assets within the family line, provide tax efficiencies, and prevent fragmented ownership that undermines long-term strategy.

But in 2025, the relationship between family trusts and borrowing power is more complicated than ever. Lenders respect trusts as vehicles of governance, yet they also approach them with caution. Some see them as a safeguard, while others view them as barriers that reduce transparency and accountability. Families considering or already operating through trusts must understand how these structures influence borrowing, both positively and negatively—if they want to avoid surprises when refinancing or expanding.

This blog explores the evolving role of trusts in family property finance, how lenders assess them, the common challenges they create, and the strategies families can adopt to ensure borrowing remains flexible even as governance strengthens.

Why Families Use Trusts

The appeal of trusts is straightforward. They allow assets to be controlled by trustees for the benefit of named beneficiaries, often across generations. For property portfolios, this brings several advantages.

Trusts help preserve control. Instead of dividing properties between heirs upon death, a trust can keep the portfolio intact, ensuring it is managed professionally and in line with family values. This can prevent the fragmentation that occurs when siblings inherit individual assets and pursue different strategies.

Trusts also provide continuity. Management does not depend on any one person; trustees can continue operating even after the founder’s death, smoothing transitions.

Tax planning is another driver. While UK tax rules for trusts have tightened, there remain contexts where trusts can help mitigate inheritance tax or provide efficiencies in how income is distributed. Families often combine trusts with other planning tools, such as whole of life policies, to ensure liquidity is available when tax liabilities arise.

Finally, trusts provide protection. They can shield assets from certain personal risks, such as divorce or creditor claims, ensuring the portfolio remains secure for future generations.

How Lenders View Trusts in 2025

Lenders’ attitudes toward trusts are mixed. Some see them as a sign of sophistication and long-term planning. Private banks in particular are often comfortable lending to trusts, provided governance is robust and trustees are clearly identified. They may even prefer trusts, seeing them as vehicles that support enduring relationships.

High street banks, however, tend to be more cautious. Their systems are built for straightforward individual or company borrowing. Trusts introduce complexity—multiple parties, unfamiliar legal structures, and potential opacity around beneficiaries. For these lenders, trusts can appear as additional risk rather than reassurance.

Specialist lenders fall somewhere in between. They often accept trusts but impose conditions, such as requiring personal guarantees from trustees or beneficiaries. This echoes patterns we explored in Intergenerational Guarantees in Family Property Finance, where lenders use guarantees to anchor accountability even when ownership is less direct.

The Common Challenges of Trust-Based Borrowing

For families operating through trusts, borrowing can be slowed or constrained by several recurring issues.

Documentation is often the first hurdle. Lenders need full trust deeds, details of beneficiaries, and clarity over powers of trustees. If paperwork is missing or unclear, facilities can be delayed or declined.

Accountability is another issue. Lenders want to know who is ultimately responsible. If trustees are reluctant to provide personal guarantees, lenders may hesitate. This creates tension: families often set up trusts to limit personal liability, but lenders often require precisely that liability as a condition of lending.

Transparency can also be a sticking point. Trusts are sometimes viewed, fairly or unfairly, as vehicles for obscuring ownership. In today’s regulatory environment, with strict anti-money laundering and know-your-customer requirements, lenders scrutinise them heavily.

Finally, flexibility may be reduced. Some lenders impose lower loan-to-value limits or stricter covenants for trust-held properties, reflecting their perception of added risk. This can reduce the borrowing power of the portfolio compared to direct ownership.

Example Scenario: The Restrictive Trust

Consider a family that transfers a £15 million portfolio into a discretionary trust for tax planning. The trustees approach a mainstream bank for refinancing. The bank raises concerns: the trust deed is lengthy, beneficiaries are widely defined, and the trustees refuse to give personal guarantees.

The result is that the bank offers a smaller facility at a higher margin than the family expected. The portfolio remains stable, but borrowing power is constrained. In this case, the trust delivered governance and protection but limited financial flexibility.

Contrast this with a family working with a private bank. The trustees provide guarantees, governance is clearly documented, and broader wealth is held with the same institution. The bank provides a facility on flexible terms, seeing the trust as a long-term partner. The outcome demonstrates how much depends not only on structure but also on presentation and lender relationship.

How Trusts Affect Succession and Borrowing Together

Trusts are often created for succession purposes, but their impact on borrowing during transitions must not be overlooked. When portfolios pass from one generation to the next, lenders want clarity on who controls the assets and who is liable for debt.

A trust can reassure lenders if governance is clear and responsibilities are transparent. It can also alarm them if control appears fragmented or if beneficiaries are disengaged. As noted in Family Governance and Lender Confidence, structure alone is not enough, what matters is how the structure is managed and communicated.

For heirs, trusts can be double-edged. They prevent disputes by centralising control, but they may also prevent individuals from accessing borrowing power directly. Children who inherit as beneficiaries rather than owners may find their ability to raise finance independently constrained.

Strategies to Balance Trusts and Borrowing Power

The key to using trusts effectively without undermining borrowing power lies in balance.

Families must ensure documentation is watertight. Trust deeds should be professionally drafted and updated to reflect current realities. Ambiguities create delays and suspicion.

They must also accept that lenders will often require personal accountability. This may mean trustees providing guarantees or agreeing to covenants. While this seems to undermine the protective purpose of the trust, in practice it is often the price of access to competitive finance.

Families should also consider the choice of lender carefully. High street banks may struggle with trust structures, while private banks and specialist lenders may embrace them—provided governance is strong. Independent brokers with whole-of-market access can match the trust structure to the right lending partner.

Finally, communication across generations is vital. Beneficiaries must understand how the trust interacts with borrowing and what obligations may fall on them. Without clarity, heirs risk being surprised by restrictions or liabilities at critical moments.

The Long-Term View

Trusts are neither a panacea nor a problem in themselves. They are tools. In 2025, they remain highly relevant for families who want to preserve property wealth across generations. But their impact on borrowing power is real and must be understood.

The families who succeed are those who integrate trusts into a broader strategy—aligning governance, borrowing, and succession. They view trusts not as shields to hide behind, but as frameworks to present confidently to lenders. When handled in this way, trusts can enhance rather than hinder borrowing, ensuring that wealth is preserved and portfolios remain resilient.

The lesson is clear: trusts can strengthen family governance, but only if families also strengthen their approach to borrowing within them.

How Willow Can Help

At Willow Private Finance, we advise families on how trusts interact with borrowing power. We review trust deeds, liaise with lenders, and structure facilities that respect both governance and financial flexibility.

Because Willow is independent and whole of market, we can access lenders comfortable with trust structures, including private banks that view them positively. Our goal is to ensure that families benefit from the protection and continuity of trusts without sacrificing the ability to borrow and grow.

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