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Putting life insurance in trust, and why almost everyone should

It costs nothing, takes one form, and it is the step most often skipped. Without it a payout can be taxed and can sit locked in an estate for months.

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The short answer

A trust holds the policy outside your estate, so the insurer pays the trustees rather than the estate. That normally keeps the payout clear of inheritance tax at 40% above the £325,000 nil rate band, and it means the money arrives in weeks rather than after probate. It costs nothing at application.

£0Cost to set up at application
£325,000Inheritance tax nil rate band
40%Rate charged above it
WeeksPayout speed, rather than months
What is on this page
  1. What writing a policy in trust does
  2. With a trust and without
  3. The tax point, with numbers
  4. The speed point matters more than people expect
  5. The common types of trust
  6. Choosing trustees
  7. Setting it up
  8. How we handle this

What writing a policy in trust does

A trust separates the policy from your estate. The insurer pays the trustees, who pay the people you named.

It usually avoids inheritance taxMoney paid into an estate above the £325,000 nil rate band can be taxed at 40%. A trust normally keeps the payout outside it.
It pays before probateAn estate can take months to release money. A trust pays in weeks, which is when the mortgage payments are still due.
It goes where you decidedThe trust names the beneficiaries. Your will and the intestacy rules do not override it.
It costs nothingSet up at the point of application, there is no fee. Doing it later is also usually free but needs more paperwork.

With a trust and without

Written in trust Not in trust
Who the insurer pays The trustees Your estate
How long it takes Usually a few weeks After probate, commonly several months
Inheritance tax Normally outside the estate Counts towards the £325,000 threshold
Who decides where it goes The trust you signed Your will, or the intestacy rules
Cost to arrange Nothing at application Nothing, and it costs the family

The speed line is the one families notice. The mortgage is still due in the months an estate takes to settle.

The tax point, with numbers

Inheritance tax is charged at 40% on the part of an estate above the nil rate band of £325,000. A residence nil rate band can lift the threshold to £500,000 where a home passes to children or grandchildren.

A £300,000 policy paid into an estate that is already at the threshold adds £300,000 of taxable value. At 40% that is £120,000 of tax on money bought to protect a family.

Between spouses and civil partners there is normally no inheritance tax, so the issue often appears on the second death rather than the first. That is exactly when the family is least equipped to deal with it.

Got a policy that is not in trust?

Tell us the insurer and we will tell you what is needed. It is usually one deed and no charge.

Ask us a question

Prefer WhatsApp? Message us there. We are open Monday to Saturday, 9am to 8pm.

We advise on and arrange life cover, critical illness cover and income protection ourselves. There is no fee to you for our advice. If you take out a policy, the insurer may pay us a commission.

The speed point matters more than people expect

Without a trust, the insurer usually pays the estate. The executor needs a grant of probate before that money can be released.

Probate commonly takes several months. In that time the mortgage, the bills and the funeral all still have to be paid.

With a trust, the trustees claim directly. Payment in a few weeks is normal. For a family with a mortgage, that difference is the whole point.

Grandparents in the garden with their grandchildren

The common types of trust

Absolute or bare trust

Fixed beneficiaries

You name who benefits and it cannot be changed later. Simple, and right where the beneficiaries will not change.

Discretionary trust

Trustees decide

Trustees choose among a class of beneficiaries, guided by a letter of wishes. Flexible, and better where circumstances may change.

Split trust

For combined policies

Used where a policy includes critical illness cover. The death benefit goes into trust while the critical illness benefit stays with you.

The split trust point catches people. If a combined life and critical illness policy is written wholly in trust, a critical illness payout could go to the trust rather than to you while you are alive.

Choosing trustees

  • Choose at least two, so a claim is not held up by one person being unavailable
  • They should be people who will still be around and capable in twenty years
  • You can be a trustee of your own policy, and usually should be
  • Tell them they are trustees, and tell them where the paperwork is
  • Review the choice after a divorce, a death or a serious falling out

The most common failure here is not the trust. It is that nobody told the trustees the policy existed.

Setting it up

1

Do it at application

It is a form the insurer provides, and there is no charge.

2

Pick the right type

Discretionary for flexibility, absolute for certainty, split for combined policies.

3

Name trustees and beneficiaries

At least two trustees. Add a letter of wishes if it is discretionary.

4

Store it somewhere findable

With the will, and tell the trustees where that is.

5

Review after any life change

Marriage, divorce, a new child or a death should all trigger a look.

How we handle this

We arrange the trust as part of setting up the cover. It is included and costs nothing extra. The insurer may pay us a commission if the policy goes ahead.

If you already hold a policy that is not in trust, it can usually be put into trust now. We also offer free trust guidance for existing policies.

Three generations of a family together

Who this suits, and who it does not

A trust matters most if
  • Your estate is near or above the inheritance tax threshold
  • You are not married or in a civil partnership
  • Your family would struggle to wait months for probate
  • You want the money to go somewhere your will does not direct
Take extra care if
  • The policy also includes critical illness cover, where a split trust is needed
  • Your beneficiaries are under 18
  • You have separated but not divorced
  • You are naming a beneficiary who receives means-tested benefits

Check broadband before you make an offer in Trust

Broadband speeds can vary street by street in Trust, so check the exact address before you commit. Ofcom's free checker shows which broadband speeds and mobile coverage are available at any UK property.

Check broadband at an address (Ofcom)

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We can introduce you to a specialist who can combine your mobile, broadband and utilities into one bill. There's no fee for the introduction.

We don't provide these services ourselves. Switching household bills is not a regulated financial service, so FCA protections and the Financial Ombudsman do not apply. We'll only pass your details to the specialist if you ask us to. See our privacy notice.

Questions people actually ask

What does writing life insurance in trust mean?
The policy is held by trustees rather than forming part of your estate. The insurer pays the trustees, who pay your chosen beneficiaries, usually without waiting for probate and usually outside inheritance tax.
Does a trust save inheritance tax?
Usually yes on the policy proceeds. Inheritance tax is charged at 40% above the £325,000 nil rate band, so a large payout into an estate can create a substantial bill.
How much does it cost to put a policy in trust?
Nothing at the point of application. The insurer provides the trust form and it is completed alongside the policy.
Can I put an existing policy in trust?
Usually yes. It needs a deed rather than the application form, and the insurer can supply one. Doing it years later still helps.
Who should my trustees be?
At least two people you trust who will still be around and capable in twenty years. You can and usually should be one of them yourself.
What is a split trust?
A trust for a combined life and critical illness policy. The death benefit goes into trust while the critical illness benefit stays payable to you while you are alive.
Does a trust override my will?
For the policy, yes. The trust decides who receives the proceeds, and the will does not change that. Keep both consistent with each other.
Can I change the beneficiaries later?
With a discretionary trust, the trustees have flexibility guided by your letter of wishes. With an absolute trust, the named beneficiaries cannot be changed.
How do I check broadband speed at a property?
Use Ofcom's free broadband and mobile checker at checker.ofcom.org.uk. Enter the property's postcode and choose the address to see which broadband speeds and mobile coverage are available before you make an offer.

Where to go next

Life insuranceThe cover itself.Free trust guidanceFor policies you already hold.How much cover?Work out the sum first.No children?Why unmarried couples need this most.Pensions on deathThe other nomination people forget.Income protection or critical illness?The cover for being alive and unable to work.
Where these figures come from

Figures checked on 1 September 2026 and correct for the 2026/27 tax year. Rates change, so check the source before you act on a number.

Life cover, critical illness cover and income protection are advised on and arranged by us directly.

Last reviewed September 2026.

One form, no cost, and it changes what your family receives

We set trusts up as part of arranging cover, and we will look at existing policies too.

Start a conversation

Prefer WhatsApp? Message us there. We are open Monday to Saturday, 9am to 8pm.

We advise on and arrange life cover, critical illness cover and income protection ourselves. There is no fee to you for our advice. If you take out a policy, the insurer may pay us a commission.

More on trusts and getting the money paid

Cover with a health conditionDiabetes, cancer, mental health, blood pressure. Start here.Should it be in trust?Usually free, and it decides who gets the money when.How long does it take to pay?Weeks in trust. Longer if it waits for probate.If you are not marriedThere is no common law spouse. Your partner may get nothing.