A relevant life policy has to be in trust in practice: the tax rules say the money must end up with individuals or charities, and the providers print a trust form to make sure it does. For a company taking out relevant life cover, the usual route is a discretionary trust, with the employer and often one or more family members as trustees.

An FCA-authorised broker can set out how a relevant life policy and its trust fit together for your company. The form on this page collects a few contact details, then a broker rings you and charges nothing for the call.

Does a relevant life policy have to be written in trust?

The legislation does not use the word “trust” as a requirement; it sets conditions on who the money may reach. Section 393B of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) defines a single-life relevant life policy as one where, among other things, “conditions C and D in that section and conditions A and C in section 482 of that Act are met”. The section 482 in question belongs to the Income Tax (Trading and Other Income) Act 2005 (ITTOIA).

Condition A in section 482 says any sums payable under the policy must go, directly or indirectly, either to “an individual or charity beneficially entitled to them”, or to “a trustee or other person acting in a fiduciary capacity who will secure that the sums or other benefits are paid to or for, or conferred on, or applied in favour of, an individual or charity beneficially.” So the statute lets the money go straight to an individual or pass through trustees; it does not itself demand a trust. Zurich’s trust deed notes give the providers’ reasoning: as the death benefit must reach individuals or charities, “a trust suits this purpose best.”

HMRC’s Insurance Policyholder Taxation Manual (IPTM7040, 29 April 2022) says of that route: “This is permitted provided the trustees secure that the only beneficial recipients of the death benefits are individuals or charities.” The page is written about group life policies, and HMRC’s Employment Income Manual (EIM15045, 28 July 2020) applies the same conditions to a single-life policy as if they referred to the insurance of that one person. EIM15045 also notes that employers often hold a life policy provision in a discretionary trust. If that trust is a registered pension scheme, the relevant life provisions cannot apply, and HMRC points to the Pensions Tax Manual instead.

HMRC adds that these are ongoing tests and questions of fact, and that “it is neither necessary nor sufficient that the trustees declare that they will only distribute death benefits to beneficiaries in accordance with the conditions.” What counts is where the money actually goes, not a promise made in advance. The tax effects themselves, such as the corporation tax deduction and what the employee is taxed on, are set out on relevant life insurance tax treatment.

Why do relevant life providers want the trust in place from the start?

Aviva’s key features (EDCO1771, January 2026) say the owner must place the cover in trust when applying, and that if it is not written in trust the policy “may not meet HMRC’s definition of relevant life insurance for taxation purposes”. Aviva adds that the employee’s or their dependants’ entitlement to the benefits could be affected.

Zurich’s key features (PW720504007, August 2025) ask for the trust to be arranged before the policy starts and call this “a HM Revenue and Customs (HMRC) condition to claim tax relief”; the legislation itself frames the rule as one about who receives the money. Royal London’s relevant life application form (P9A0030/23; adviser document) will not let a start date be chosen until the trust form is complete. Scottish Widows lists a Relevant Life Trust Form among the documents for its cover.

The providers also give practical reasons. Legal & General’s technical guide for advisers (W13965, June 2026; adviser material) says a trust should let the money reach the right people quickly, without lengthy legal processes, and can control when it is paid out. Zurich’s trust deed notes (July 2026) describe payment to the trustees without waiting for a grant of probate. Whether the money counts towards the employee’s estate for inheritance tax is dealt with on the tax treatment page and, for the trust’s own charges, on is life insurance taxable in a trust.

Which type of trust do relevant life policies use?

Providers that print a type describe a discretionary trust. Zurich’s deed is a discretionary trust for employers taking out its Relevant Life Policy, and Aviva’s trust form (EDCO2125, January 2026) describes a flexible discretionary trust that the employer, as policyholder, sets up for one employee, the life assured. Royal London’s adviser page on its relevant life trust says the trust is only available as a discretionary trust. Legal & General’s technical guide says its plan “assumes that the policy will be set up in a Discretionary Trust (L&G’s Relevant Life Plan Trust) at the start”.

In a discretionary trust the trustees choose who is paid. Aviva’s form says they have complete discretion over which potential beneficiaries benefit, how much they receive and when, and Legal & General says no discretionary beneficiary is guaranteed to receive any of it. The employee can say who they would like to be paid, but the wish does not bind the trustees: Aviva calls its form an Expression of Wishes, Legal & General a Nomination Form, Zurich a nomination form and Scottish Widows a Letter of Wish Form. Zurich notes that, generally, unless the trustees find a compelling reason not to follow the employee’s wishes, they will pay the nominated beneficiary.

Zurich’s notes call the trust irrevocable, with changes generally needing the court’s agreement. What an absolute, flexible or bare trust would mean for an ordinary life policy is covered on life insurance trust options. The broker who rings after your form comes in can explain which trust form an insurer supplies for relevant life cover.

Who are the trustees of a relevant life policy trust?

The trustees are the legal owners of the policy once it is in trust, and they are who the insurer pays. How the roles are filled differs by provider.

Aviva’s key features say: “You must be a trustee, together with the person covered. It may also be beneficial to appoint a third trustee.” Its trust form names the settlor (the employer) and the life assured (the employee) as initial trustees, plus any additional trustees. Legal & General goes the other way on the employee: “The employer is automatically appointed as a trustee but the employee is not.” Up to four further trustees can be appointed, one of whom can be the employee, and its deed lets the employer opt out of being a trustee.

Under Zurich’s deed the employer is automatically an initial trustee and should appoint other individuals to act with it, and Zurich strongly recommends at least two additional trustees, because some provisions in the trust need a majority of trustees to act.

Aviva’s form asks for every signature to be witnessed by an independent witness, who should be 18 or over and not related to the employer or the trustees. Zurich provides its trust as a draft for the employer’s legal advisers to approve, and its key features say it cannot advise whether the draft suits a particular business. Who makes a sensible trustee is for the employer and a solicitor to settle.

What do the trustees do on a claim, and if the employee changes job?

Aviva says the sum assured is paid to the trustees, who must then follow the terms of the trust, and that they need to send in the original trust document and any deeds altering it before payment. Royal London’s plan details (April 2024) describe the same steps: the cover is paid to the trustees, who send the original trust deed and any deeds altering it.

If the employee leaves, Zurich and Scottish Widows describe three options: a new employer takes over the policy and trust, the trustees assign it to the employee, or the cover ends. Where a new employer takes over, Scottish Widows says the previous employer should resign as trustee and the new one be appointed. Aviva says there must be at least two trustees at any given time, one of whom is not the settlor. Zurich warns that taking the policy out of the trust “will result in extra tax charges for your business and for your employee”.

How a given insurer handles a change of job, including its terminal illness benefit, is a good question for the broker on your call-back.

Frequently asked questions

Can a relevant life policy be written in a trust other than the provider’s own form?

Aviva says you can use its own trust form or one prepared by your own professional advisers. Legal & General’s guidance assumes its own discretionary trust, and warns that a different set-up may not match what the guide says.

Does the trust have to be in place before the policy starts?

The providers say so. Aviva says to do it when applying, Royal London’s form says the plan must be held under trust from commencement, and Zurich says to arrange it before the policy starts. Legal & General’s guide says “from outset”.

Is the Zurich relevant life trust deed the same as its other trusts?

No. Zurich says its deed is only for employers taking out a Zurich Relevant Life policy, and must not be used with any other policies. It is also meant for a new policy, not one already in force.

Can the policy be moved out of the trust into the employee’s name?

Yes, by assignment. Zurich says the employer and any other trustees can assign the policy out of the trust to the employee in their own name, which needs a deed, ends terminal illness cover and has tax implications. Scottish Widows describes the same option, with the employee then paying the premiums.

When a trust and a policy both need to suit one company, a broker can check the policy side on a phone call that is free, and you set it going with the form on this page.

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