A life insurance trust is a legal arrangement in which the owner of a life policy gives it to trustees, who hold it for people the owner chooses, so a payout reaches them through the trustees rather than through the estate of the person who died. Three roles run through it: the settlor who sets it up, the trustees who hold the policy, and the beneficiaries it is held for.

If you are weighing a trust for a policy you hold or are about to buy, an FCA-authorised broker can tell you how the insurers they deal with handle trusts, while the legal and tax side is for a solicitor or tax adviser. To reach a broker, use the form on this page; it is free.

What follows describes how trusts work and what HMRC and insurers say, as read in October 2026. It is not tax or legal advice, and tax rules can change.

What does it mean to put life insurance in trust?

HMRC's guide to trusts and taxes says "A trust is a way of managing assets (money, investments, land or buildings) for people." A life policy is one such asset. Aviva's Guide to trusts (EDCO0853 0126) says a trust "allows the owner of property (the settlor) to transfer legal, and/or beneficial, ownership of that property to other persons or a company (the trustees)."

Legal & General, on its protection trusts page, says the trust means "the policy is given away to the trustees who then legally own the policy and look after it for the benefit of the beneficiaries." The trustees then claim: they "make the claim on the policy and ensure that the money goes to the beneficiaries as the policyholder intended."

The trust holds the policy; the policies themselves are explained in our guides to term life insurance and whole of life insurance. The trust fund is whatever the trust holds, and for a life policy that may be nothing but the right to a payout: Aviva notes that "If the only property in the trust is an insurance policy, there will be no fund to invest until the benefits under the insurance policy become payable."

Who are the settlor, the trustees and the beneficiaries?

HMRC names the three roles: "the 'settlor' - the person who puts assets into a trust", "the 'trustee' - the person who manages the trust" and "the 'beneficiary' - the person who benefits from the trust".

SettlorTrusteesBeneficiaries
WhoThe policyholder; both people on a joint policyThe settlor plus at least one other, in Aviva's and L&G's trustsThe people the settlor wants the money to reach
RoleSets the trust up, picks trustees and beneficiaries, usually keeps paying premiumsOwn the policy, claim, and pay out under the trustReceive what the trustees pay out

Aviva says a joint policy needs both owners: "both owners must consent to put the policy into the trust. If this happens they are both settlors of the trust." Legal & General notes that "the settlor is automatically a trustee of all Legal & General's insurance trusts", yet "The settlor does not control the trust, though they are usually still responsible for paying the premiums on the policy." HMRC says "The trustees are the legal owners of the assets held in a trust." What trustees do, and how to choose them, is on what a life insurance trustee does.

Trustee or beneficiary: what is the difference?

A trustee holds the policy and carries the duties; a beneficiary is who it is held for. In L&G's words the beneficiaries are the people "who the policyholder wants to receive the money from the trust fund", and they "do not control the trust". They also wait: Aviva says they "will not usually receive anything from a trust holding a life insurance policy until the settlor dies and a payment is made to the trustees."

What kinds of life insurance trust are there?

HMRC lists several types of trust. Among them it describes a bare trust as one where "the beneficiary has the right to all of the capital and income of the trust at any time if they're 18 or over (in England and Wales), or 16 or over (in Scotland)", and a discretionary trust as one where "the trustees can make certain decisions about how to use the trust income, and sometimes the capital."

Aviva says "many insurance companies, like us, have 'ready-made' adaptable specimen trusts available for the life insurance policies they offer", and its own two follow HMRC's split. In its bare trust, "The beneficiaries and trust assets each beneficiary is entitled to are fixed at the start of the trust and it is not possible to change this or make additions to the trust." In its discretionary trust, "The trustees have a discretion to decide which of the potential beneficiaries to benefit under the trust, how much they receive and when", guided by an "Expression of Wishes" document "which is not binding on the trustees."

Legal & General offers "four types of trusts. Absolute, Discretionary, Survivor's Discretionary and Flexible Trusts." Of its absolute trust it says "children born later cannot be included or a spouse cannot be removed following a divorce." Joint-policy trusts are covered in joint life insurance in trust, and critical illness cover in critical illness policy in trust.

What difference does a trust make when the policy pays out?

Aviva says that without a trust "a grant of probate, or letters of administration if the deceased had no Will, would be needed before the insurance company could pay out any money to the deceased's personal representatives. This can take several months." With a trust, "the trustees claim on the policy and the death benefits are paid directly to the trustees."

Who receives the money is the other change. L&G warns that "The worst case could be if the policyholder is not married, and has not made a will, their partner may not be legally entitled to the policy proceeds at all unless placed in trust"; see life insurance for unmarried couples. On a joint policy not in trust, L&G says "the policy proceeds will automatically be paid to the survivor."

A policy's own wording can also create a trust. The Married Women's Property Act 1882 (Section 11) says a policy on a person's own life "expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them" (and likewise for a husband's policy) "shall create a trust in favour of the objects therein named".

How are life insurance trusts treated for inheritance tax and registration?

This is the general position as HMRC and insurers describe it, not tax advice, and it can change. For when a payout is taxed, see is a life insurance payout taxable?, and for whole of life, whole of life insurance and inheritance tax; the wider subject is in the trusts and tax guides.

Inheritance tax. HMRC's Inheritance Tax Manual says that for a policy someone owns on their own life, with no trust, the proceeds form part of their free estate and so are taxable on their death. Whether tax is due then depends on the whole estate: GOV.UK sets the threshold at £325,000 and the standard rate at 40%. L&G says "Once a policy is placed in trust, it will not usually form part of the estate." Aviva adds a condition, "as long as neither the settlor nor his estate or personal representatives are a beneficiary", and warns that "if the money is kept in the trust past its tenth anniversary, some Inheritance Tax may be payable and a charge could arise when money leaves the trust." L&G adds that "in some cases, the trust itself might have to pay tax."

Registration. Whether a trust must be registered with HMRC's Trust Registration Service turns on conditions and time limits. HMRC's "Check if you need to register a trust" (published 30 June 2026, last updated 13 July 2026) lists, among trusts not needing to register, "a trust holding life insurance policies that only pay out on death, illness, or disability". The conditions, and what changes after a death, are set out in how to put a life insurance policy in trust.

What should you weigh before putting a policy in trust?

Aviva warns: "Once you have signed the trust form and the trustees have agreed to act, then you have given away the policy (and any benefits payable under it)", and "you do not have a cooling-off period when you set up a trust". It says "if you want to be able to benefit from something that you're thinking of putting into a trust or if you think you might want to have access to it in future, then a trust may not be right for you." L&G says "Once the trust has been created it cannot usually be cancelled before it has served its purpose." Aviva's guide covers England and Wales only: it "does not cover trust law in Scotland or Northern Ireland".

To talk through how a policy could be arranged with a trust, complete the short form on this page, and a broker (FCA-authorised) will go over the options with you, at no charge. The legal and tax decision stays with you and, if you want one, your own solicitor or tax adviser.

Frequently asked questions

Does life insurance have to go in trust?

Not according to these insurers. Aviva says "a trust is not right for everyone", and L&G says a policy can be put in trust when it is taken out or later. Without one, Aviva says, a single-life payout goes to the settlor's estate.

How do I know if my life insurance is in trust?

Look in the policy papers for a trust form, or ask whoever arranged the policy or the insurer. L&G says trustees making a claim need "the trust form (and any subsequent deeds)", so the trust form is the document to look for.

Can the beneficiaries be changed later?

It depends on the type. L&G says "It is not possible to change the beneficiaries of an Absolute Trust", while under its discretionary trust the trustees choose who benefits from a wide list of people.

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