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A trust is a legal arrangement that allows you to leave your assets (such as money, investments, property or land) to your loved ones when you die, or on a certain date.
For example, you might want to leave some savings or a family heirloom for your grandchild when then turn 18. Whoever you choose to benefit from your trust are known as your beneficiaries.
A trust is managed by one or more trustees. This could be a family member, friend, or a legal professional. It’s their job to look after the trust and manage it responsibly.
Your life insurance is a significant asset, and it too can be put into a trust.
Here are some of the ways you could benefit from ‘writing life insurance in trust’:
Putting your life insurance in trust means you get to decide you’d you like to benefit from your trust and who you’d like to manage it.
With a trust in place, your loved ones could receive their inheritance sooner, instead of potentially waiting for probate, which can delay things. Probate is the legal process of validating a will (if there is one) and managing a person’s estate after they die.
When you put your life insurance in trust, it becomes legally owned by your trustees. Because it’s no longer counted as part of your estate, it shouldn’t be subject to inheritance tax. However, there are exceptions to this.
As you’re handing over legal ownership of your life insurance policy to someone else (your trustees), you need to think carefully about whether this is a right decision for you.
Any decision you make after putting your life insurance in trust needs to be signed off by your trustees – not just yourself. So, it’s important to name a trustee who you trust.
With a trust having legal and tax implications, it’s hard to make changes to a trust once it’s set up. Once you’ve put a life insurance policy in trust, you usually can’t take it out of trust again.
Beneficiaries can be people or organisations. They can include family members, friends, charities, or any other person you choose.
If you name a beneficiary who is under 18 years of age, a trustee will hold their assets until they reach 18. You can choose the trustee as well.
Here are some of the different trusts you can set up, depending on what you’re trying to achieve:
Here, the trustee manages the trust, but all proceeds should go to the beneficiary when they turn 18 (or 16 in Scotland). They may continue to look after the trust if the beneficiary finds it hard to manage it themselves. Absolute trusts are usually fixed, meaning they can’t be changed once set up.
A flexible trust allows you to name a number of people as potential beneficiaries, which you can then change. For example, you may want to add grandchildren in the future.
A discretionary trust gives your trustees more decision-making power in terms of how often money is paid out of the trust to the beneficiaries. You can still express your wishes in writing, but they can be helpful if you’re worried that someone would spend recklessly if they had free access to the trust.
A survivor trust could be suitable if you have a joint life insurance policy. Here, the surviving policy holder inherits your policy before any beneficiaries (as long as they’re still alive 31 days after your death). It can offer reassurance if you aren’t married or in a civil partnership.
It's important to seek professional financial and legal advice before setting up a life insurance policy and deciding whether to place it in trust.
Once ready, you can set up a trust at any point. You can do it when the policy is first written, or at a later date – it's up to you.
Many people think about setting up a trust when they’re making a will or taking out life insurance to plan how loved ones will be looked after once they’re gone.
If you’re looking to put an existing policy in trust, or make changes to an existing trust, you may need help from a solicitor or financial advisor. Bear in mind – they may charge for this service.
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This article was last updated: 05/08/2025, 07:18
