What is a trust?
Putting a life insurance policy "in trust" sounds legal and complicated, but the idea behind it is simple. Here is what a trust actually is, and why it matters for keeping a payout in your family's hands.
What a trust actually is
A trust is a simple legal arrangement where trusted people (the "trustees") hold your life insurance policy on behalf of the people you want to benefit. It means the payout goes to them directly, rather than becoming part of your estate (a legal word for the total amount of wealth you leave behind).
Why "written in trust" matters
When a life policy is written in trust, the payout generally goes straight from the insurer to the chosen people, bypassing the estate. In general terms that can mean:
- The lump sum sits outside the estate, so it isn't caught by the 40% inheritance tax charge
- Trustees can often pay beneficiaries within days, without waiting for probate
- You keep control of who receives what, and when
- Funds can be available to help meet an inheritance tax bill without selling assets in a hurry
How to set one up
Writing a policy in trust is usually free and often just a single form from your insurer. Our simple guide to writing a policy in trust walks through how to do it, and when it's worth getting advice.
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.