Written by George Sweeney Reviewed by Michael Chike
13 July 2026
First Published
Taking out life insurance is one of the most responsible financial decisions you can make to protect your loved ones if the worst were to happen. However, simply buying a policy doesn’t guarantee that the payout will reach your family quickly or without a heavy tax burden.
If you want to make sure your money is protected and distributed exactly as you intend, you should consider placing your life insurance policy into a trust. Here, we explain exactly what a life insurance trust is, the different types available, the advantages and disadvantages, and how to put a policy in trust with expert support.
Can you put life insurance into a trust?
Yes, absolutely. Putting life insurance into trust is very common and highly recommended for many people.
When you have a life insurance policy written in trust, you are legally separating the policy's payout from your personal estate. Instead of the money being yours (or belonging to your estate when you pass away), the policy is owned by the trust itself.
You appoint "trustees" who are legally responsible for managing the trust, and you name "beneficiaries" who will ultimately receive the money, like your family, for example.
Because the trust life insurance policy sits outside of your estate, it completely bypasses the standard legal probate process and is treated differently for inheritance tax (IHT) purposes, offering significant financial benefits and a simplified process for your grieving family.
Types of trusts you can use
There’s no single "one-size-fits-all" trust for life insurance. The best option depends entirely on how much control you want to retain and who your beneficiaries are.
The most common types of life insurance trusts include:
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Discretionary Trust: A life insurance discretionary trust is the most popular and flexible option in the UK. You list potential beneficiaries, but give your trustees the "discretion" to decide exactly who gets what, and when. This is highly useful if family circumstances might change in the future.
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Survivor’s Discretionary Trust: This form of joint life insurance in trust pays out to the surviving policy owner. So, if you die before your partner, they’d be entitled to inherit your policy before your beneficiaries (perhaps children). If both policy owners die within a short timeframe (30 days) of one another, your beneficiaries will benefit as if it were a Discretionary Trust.
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Bare Trust: Also known as an “absolute trust”, this is a fixed trust. In practice, this means you name the exact beneficiaries and the exact split of the money from day one. Once set up, the trust cannot be altered, and the beneficiaries cannot be changed.
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Irrevocable Life Insurance Trust (ILIT): An ILIT is simply a trust that cannot be altered, amended, or cancelled once established. In the UK, an Absolute or Bare trust acts as a form of irrevocable trust for life insurance policies. Because you give up all control over the policy, it offers robust protection from Inheritance Tax, ideal for high net worth individuals.
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Flexible Trust: Similar to a discretionary trust, it allows you to name two types of beneficiaries: "default" beneficiaries (who automatically receive a set portion of the payout) and "discretionary" beneficiaries. It’s useful if you want to ensure certain people (like children) definitely receive a share, while giving your trustees the power to allocate the rest as circumstances require.
How to put life insurance into a trust
Setting up a trust for life insurance is actually much simpler than most people realise, but it must be suitable for your specific needs and done correctly to be legally binding.
Here’s a brief step-by-step process for putting life insurance in trust:
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Choose your trust type: Decide whether you want a flexible discretionary trust or a fixed absolute trust (or another type of arrangement).
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Choose your trustees: Select two or three people you implicitly trust (like a spouse, sibling, adult child, or solicitor) to manage the paperwork and distribute the payout when you die.
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Complete the trust deed: This is the legal document that officially places the life insurance under trust. You, your trustees, and a witness must sign this form.
It’s likely you’d need expert support setting this up because trust law can be complex, so most people use an independent financial adviser to handle the paperwork.
If you’d like qualified, independent guidance about putting a life insurance policy in trust to ensure your family is fully protected, you can arrange a free initial chat with our life insurance experts below.
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Advantages and disadvantages
Before placing your life insurance policy in trust, it’s crucial to understand both sides of the coin. While the benefits usually heavily outweigh the drawbacks, it is a significant legal step.
Advantages
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Avoids Inheritance Tax (IHT): Because the policy sits outside your legal estate, the payout is generally exempt from the standard 40% IHT. For many families, life insurance trust inheritance tax planning is the single biggest reason for using a trust.
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Faster payouts: When you die, your family usually has to wait months (sometimes years) for "probate" to be granted before they can access your bank accounts. A life insurance policy in trust bypasses probate, meaning trustees can usually access the funds within weeks to pay for funeral costs or living expenses.
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Control over the money: A trust allows you to dictate exactly who gets the money. This is particularly useful when creating life insurance trusts for child beneficiaries, as the trustees can hold the money securely until the children reach the age of 18 or 21.
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Protection from creditors: If you pass away with outstanding debts, creditors can claim money from your estate. Because a trust is outside your estate, the payout is usually protected from your personal creditors, ensuring the money goes only to your family.
Disadvantages
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Loss of control: Once a policy is placed in an absolute or irrevocable trust, it’s extremely difficult (often impossible) to change your mind, cancel the trust, or change the beneficiaries if you fall out with them.
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Complexity: Understanding the legal wording of a trust deed can be daunting. If you fill out the trust forms incorrectly, the trust may be invalid. It’s usually critical to get expert advice.
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Trustee responsibility: You’re placing a heavy legal and administrative burden on your chosen trustees. They must act according to the law and manage the funds properly, which can be stressful during a time of grief.
Examples of UK life insurance providers offering trusts
Most major insurers in the UK make it relatively easy to write your policy in trust, often providing the standard forms for free when you take out the cover. Here are a few popular examples:
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Aviva: Offers a very straightforward Aviva life insurance trust form that can be used for both discretionary and survivor trusts. They allow you to place both new and existing Aviva life insurance in trust.
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Legal & General: Provides comprehensive online portals to help you set up a Legal and General life insurance trust. Writing life insurance in trust with L&G is free and can often be done entirely online.
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Vitality: A Vitality life insurance trust is highly flexible and offers extensive guidance to ensure you select the right trust for your specific health and life-linked policies.
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Zurich: You can easily request a Zurich life insurance trust form to place your cover into a flexible or bare trust.
However, a crucial element to keep in mind is that while using an insurer's free trust form is convenient, you don’t have to use their specific trust. If your estate is complex or you want to ensure you’re picking the right trust, it’s best to get independent advice. The best trust to use may not be with your existing life insurance provider.
Alternatives to a life insurance trust
If you decide that a life insurance policy trust isn't right for you, there are alternatives, though they don’t offer the same tax or speed of payout benefits:
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Writing a Will: You can simply state in your Will who should receive the proceeds of your life insurance. However, the payout will still be subject to probate delays and counts toward your estate's Inheritance Tax bill.
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Family Investment Companies (FICs): For ultra-high-net-worth individuals, creating a corporate structure to hold assets and policies can offer tax efficiencies, though this is vastly more complex and expensive than a standard trust.
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Nomination forms (for pensions): If you rely on a "death in service" benefit from your employer rather than private life insurance, you simply fill out an expression of wish form. The pension administrators already act as trustees, so you don’t need to set up a separate personal trust.
Get independent expert advice about life insurance and trusts
Deciding whether your life insurance policy should be in a trust is a massive decision. Getting the legal wording wrong or choosing the wrong type of trust can cause major headaches for your family when they are most vulnerable.
Here’s why people use Money Helpdesk when setting up their life insurance and trusts:
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Access to independent, FCA-regulated life insurance advisers
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Expert guidance on selecting the right trust and completing the paperwork
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Advisers with 5-star ratings on leading review platforms
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A free initial consultation with no obligation to proceed further
If you’d like help understanding your life insurance trust options, you can arrange a free, no-obligation chat with an independent adviser here.
FAQs
A life insurance trust definition is simply a legal arrangement where you give one or more people (the trustees) the legal responsibility to hold and manage a specific asset (like your life insurance payout) for the eventual benefit of someone else (your beneficiaries).
Example: A common sample life insurance trust scenario involves parents taking out life insurance to protect their young children. Because a 5-year-old cannot legally manage a large lump sum, the parents put the policy into a discretionary trust and name their own family members as trustees.
If the parents die, the family members nominated as trustees claim the payout quickly and use the funds to raise the children until they’re old enough to inherit the remainder.
Anyone over the age of 18 of sound mind can be a trustee. Most people choose their spouse, adult children, siblings, or close friends. You can also hire a professional trustee, such as a solicitor or accountant, though they will charge a fee for their services.
In the UK, under current laws, a trust can legally exist for up to 125 years. However, in the context of life insurance, the trust usually only lasts until the policy pays out and the trustees have fully distributed the money to the beneficiaries according to your wishes.
Generally, no. If you set up an absolute or irrevocable life insurance trust, it cannot be undone.
Even with a more flexible discretionary trust, while you can change the beneficiaries, pulling the actual policy back out of the trust to become part of your personal estate again is incredibly difficult and usually requires complex legal intervention.
Yes. Joint life insurance policies are frequently placed into a Survivor's Trust. This ensures that if the first partner dies, the surviving partner immediately benefits from the payout. If both die simultaneously, the trust dictates who the money goes to next (for example, shared children), bypassing lengthy probate.
For the vast majority of people, the answer is yes. If you want your family to receive your life insurance payout as quickly as possible, without the stress of probate, and completely shield the lump sum from Inheritance Tax and creditors, putting your life insurance policy in trust is the best way to do this.