We recommend that you consider setting up a trust for your life policy.

What is a trust?

A trust is a simple legal arrangement that allows you (the settlor) to gift your life insurance policy to someone else (the beneficiary). It's a great way to ensure that your life insurance is not considered to be a part of your estate when you die, so your beneficiaries shouldn't face the burden of paying inheritance tax on your life policy.

Setting up a trust means that you (the settlor) give your policy to the trustees who then legally own your policy and look after it for the benefit of your beneficiaries. You will still be responsible for paying the insurance premiums, but the trustees will be responsible for keeping the trust deed and any other documents safe. They make the claim on your policy and ensure that the money goes to your beneficiaries as you intended.

There are three key roles in a trust:

  • The settlor (or settlors) - The person giving away their life insurance policy is called the settlor, and if you have a joint policy then both policy holders are automatically joint settlors. Once the settlor has put their policy into trust they no longer personally own it, as it's owned by the trust, so they have limited rights to say how it's dealt with. However, the settlor is still responsible for paying the insurance policy premiums and is also usually a trustee, so they do retain some influence on how the trust is managed as a trustee. The settlor chooses the trustees and the beneficiaries and completes the trust form to set up a trust.
  • The trustees - The trustees are the people you choose to look after the trust, make any future claims, and arrange for the money to be paid to your beneficiaries in line with your instructions. As the settlor, you are automatically a trustee and it is advisable to appoint at least 2 additional trustees. Once the policy is put in trust, the trustees take legal ownership of the trust fund from you and must then act in the best interests of all the beneficiaries at all times, and can only do what is allowed in the trust deed. Your trustees must be aged 18 or over.
  • The beneficiaries - These are the people (or person) who you want to receive the money from the trust fund. The beneficiaries can also be trustees if they are over 18 years of age.

There are three key benefits to putting your life policy in trust:

  • Control - You specify who your beneficiaries are, and who you trust to act on your wishes. This can be really important if you're not married or in a registered civil partnership, as without a trust the money forms part of your estate (how much all your assets are worth) and may not automatically go to who you want. It's also important when there are children involved, as it can help ensure that they receive some financial support, but do not get full access. During your life you will also be one of the trustees, so you can work with the other trustees to ensure the money goes to who you intended.
  • Avoiding Inheritance Tax - When a life policy is not held in trust, it will normally be considered part of your estate, meaning that it can be subject to inheritance tax (40% of any part of your estate over the nil rate band which is currently £325,000 as at 1 January 2016). Using a trust should mean that the money paid out from your life insurance will not be part of your estate, increasing the amount of money passed on to your loved ones.
  • Faster payment of the money - Using a trust should help ensure that the money paid out from your life insurance can be paid to the people of your choice quicker, without the money being held up in the estate waiting for lengthy legal processes, such as gaining a grant of probate.

Are there disadvantages?

Once the trust has been created it cannot usually be cancelled before it has served its purpose and the policy cannot be cancelled without the permission of the trustees.

How to arrange your trust:

Please complete the following information and we will complete your trust form and forward it to you to be signed and witnessed. Once completed you must send the document to the insurer who will register the trust. The original trust deed will be returned to you for your records.

Your Details (step 1/4)

Policy Details (step 2/4)

Your chosen beneficiaries (step 3/4)

Beneficiaries: These are the people (or person) who you want to receive the money from the trust fund. The beneficiaries can also be trustees if they are over 18
Percentage share: The combined share of all the beneficiaries of the trust must equal 100%

Beneficiary #1

Beneficiary #2

Beneficiary #3

Beneficiary #4

Your chosen trustees (step 4/4)

Trustees: These are the people who will look after your policy and share out the trust money to your beneficiaries. You will automatically be a trustee and you must choose at least one additional trustee

Trustee #1

Trustee #2

Trustee #3

Trustee #4

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.