Trusts
Written by Check Financial · 3 min read
The short answer
Writing a life insurance policy in trust means the payout goes to people you choose, through trustees, rather than into your estate. It can mean your family receives the money sooner, and it is usually kept outside your estate for inheritance tax.
Who It's For
A trust is worth considering for most life insurance policies. It is particularly useful when:
- You want the money to reach your family quickly, without waiting for probate.
- Your estate could face an inheritance tax bill.
- You want control over who receives the money, for example children from a previous relationship.
- Your children are young, and you want trusted adults to manage the money for them.
How It Works
- You complete a trust form, usually provided by the insurer at no extra cost, when you take out the policy or later.
- You choose trustees. They are the people who will claim the money and pay it to your beneficiaries. You can be a trustee yourself, alongside at least one other person.
- You choose beneficiaries, either named people or a group such as your children.
- If you die, the trustees claim the payout with a death certificate and pay it to the beneficiaries. They don't need to wait for probate.
Types of Trust
- Discretionary trust. You name possible beneficiaries, and the trustees decide who receives what. It's flexible if your circumstances change.
- Absolute (bare) trust. The beneficiaries are fixed and can't be changed later.
- Split trust. Used with critical illness or terminal illness cover, so that any payout while you're alive comes to you, and the death benefit goes into the trust.
We'll explain which type fits your policy, and you can check with your solicitor if your estate is complex.
What It Doesn't Do
- It isn't a will. You still need a will for the rest of your estate.
- It can't easily be undone. Some trusts can't be changed at all once set up.
- It doesn't remove every tax question. Very large trusts can face their own inheritance tax charges. We'll flag this if it might apply.
- It only covers the policy. Other savings and assets aren't affected.
Real Scenario
Example scenario, not a real client
Getting the Money to the Family When It's Needed
A parent with two young children takes out level term life insurance and wants their family supported quickly if they die.
Outcome: They write the policy in a discretionary trust, with their partner and their sister as trustees. If they died, the trustees could claim straight away, without waiting for probate.
Common Questions
Does it cost anything?+
Can I put an existing policy in trust?+
Who should my trustees be?+
Can I change my beneficiaries?+
Do I still need a will?+
Related Guides
Level Term Life Insurance
Level term life insurance pays a fixed lump sum if you die during the policy term. The amount stays the same throughout, so your family knows exactly what they would receive.
Read guide →Whole of Life Insurance
Read guide →What Is Life Insurance?
How it works, the main types of cover, and who actually needs it, without the jargon.
Read guide →This guide is general information, not personal advice. Check Financial Ltd is an appointed representative of Capital Protect Ltd, authorised and regulated by the Financial Conduct Authority.