What does writing life insurance in trust mean?
Writing life insurance in trust means placing your policy into a legal arrangement where a trustee (usually a loved one or professional) holds and distributes the payout on your behalf. Instead of the money forming part of your estate, it goes directly to your chosen beneficiaries.
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There are three key reasons:
- Speed: Without a trust, a life insurance payout must go through probate — which can take 6–12 months. In trust, beneficiaries receive the money in weeks.
- Inheritance tax: Your life insurance payout forms part of your estate if not in trust. If your estate exceeds the inheritance tax threshold (currently £325,000), your beneficiaries could pay 40% tax on the payout. In trust, it sits outside your estate.
- Control: You specify exactly who receives the money and when — not a probate court.
How do I write my life insurance in trust?
- Contact your insurer and request a trust deed form (most provide one free of charge)
- Choose your trustee(s) — usually your partner, adult children, or a solicitor
- Name your beneficiaries — who you want the money to go to
- Sign the trust deed with two witnesses present
- Return the completed deed to your insurer
The whole process takes around 30 minutes and should be done as soon as possible after taking out your policy.
Can I change the trust later?
It depends on the type of trust. A bare trust cannot be changed after signing. A discretionary trust (more common) can be updated — for example, to add or remove beneficiaries, or to change trustees. Keep your trust deed under review whenever your circumstances change (divorce, new children, death of a trustee).
Does writing in trust affect my premiums?
No — writing your policy in trust has no impact on your premium. It's purely an administrative arrangement that controls what happens to the payout.
Frequently Asked Questions
No — you can write an existing policy in trust at any time. Contact your insurer and request the trust documentation. It's never too late to do this.
In most cases, yes — a life insurance payout held in trust sits outside your estate and is therefore not subject to inheritance tax. However, this depends on the type of trust used. Speak to a financial adviser for complex estate planning situations.
Most people name their partner, an adult child, or a trusted family member. Some people use a solicitor as a professional trustee. You should name at least two trustees.