Should I put my life insurance in trust?

For most people, yes. Writing a policy in trust keeps the payout out of your estate, so it is not caught by the 40% inheritance tax charge, and it reaches your family faster. It usually costs nothing. It may not suit if you need to keep control over who benefits, if the policy repays a business loan, or if your estate is comfortably within the £325,000 allowance.

When might putting life insurance in trust not be a good idea?

A trust may not suit if you want flexibility to change beneficiaries later (an absolute trust fixes them), if the policy is used as security for a loan or business protection, or if your estate is small enough that no inheritance tax would apply. A discretionary trust can restore some flexibility, and an adviser can help you choose.

Does putting a policy in trust cost anything?

For a standard protection policy it is usually free, using the insurer's own trust form. A solicitor may charge a fee for a tailored trust.

Trusts

Writing a life insurance policy in trust: a simple guide

Guide · Updated September 2026

Putting a life insurance policy "in trust" sounds complicated and legal, but it's usually one of the simplest and most valuable things you can do when you take out cover. Here's what it means and why it matters.

What "in trust" means

A trust is just a legal arrangement where trusted people, called trustees, look after your life insurance policy on behalf of the people you want to benefit. You choose the trustees (often your partner, a relative or a friend) and the beneficiaries (usually your family). When you die, the payout goes to the trustees, who pass it to your chosen people.

Why it's worth doing

It can avoid inheritance tax. Because the payout belongs to the trust rather than to your estate, it usually isn't caught by the 40% inheritance tax charge that can apply to money above the £325,000 allowance.
It's faster. Trustees can normally pay the money out within days, rather than your family waiting months for probate.
You stay in control. You decide who receives what, and you can make sure the right people are looked after.

Writing a policy in trust usually costs nothing. Most insurers provide a standard trust form free when you take out the cover.

How to do it

The easiest time to do it is right at the start, when you take out the policy. Ask your broker or insurer for their trust form, decide who your trustees and beneficiaries will be, and complete it. If you already have a policy, you can often put an existing one in trust too, though it's worth getting advice to make sure it's done correctly.

Should you always put a policy in trust? When it might not suit

A trust is the right choice for most people, but it is not universal, and a balanced view is more useful than a blanket rule. Reasons it might not suit, or might need more thought:

You give up some control. With an absolute trust the beneficiaries are essentially fixed. If your wishes might change, for example after a future marriage, divorce or a new child, a more flexible discretionary trust may suit better.
The money is no longer "yours". Once in trust, the payout belongs to the trust for your beneficiaries, so it cannot be redirected back to you.
You need trustees you can rely on. They handle the payout and pass it on, so choose responsible people and name more than one.
Business or loan protection. If a policy is meant to repay a business loan, or is assigned to a lender, it may need to sit outside a family trust.
Very small estates. If your whole estate is comfortably within the £325,000 allowance, there may be no inheritance tax to save, though a trust can still speed up payment and avoid probate delays.

Questions to ask your adviser

Should this be an absolute trust or a discretionary trust for my situation?
Who should I choose as trustees, and how many?
Are there any downsides to putting this particular policy in trust?
If it is an existing policy with a cash value, are there tax implications of assigning it?
Could a trust affect any business or loan protection I have?

The one thing to remember

If there's a single question to ask when you buy life insurance, it's this: "Can this be written in trust?" It's a small step that can make a big difference to how much of the payout actually reaches your family. If you're unsure, an independent adviser or a solicitor can set it up properly for you. You can also read whether life insurance is taxable in the UK for the wider tax picture.

Information only. This is general information, not financial, tax or legal advice, and not a personal recommendation. Tax rules depend on your circumstances and can change. Please speak to a qualified, FCA-regulated adviser or a solicitor before acting.