If you already have life insurance in place, putting your policy in trust is an important step to consider.
It helps make sure the payout goes to the people you choose, as quickly as possible and in line with your wishes. If your policy is not in trust, it is worth reviewing.
Why putting your policy in trust matters
Life insurance is designed to support your loved ones. But without a trust, the payout may form part of your estate. This can mean delays while probate is completed and, in some cases, it can affect how and when the money is passed on.
Putting your policy in trust helps avoid these issues.
What does putting life insurance in trust mean?
Putting your life insurance in trust means placing your policy into a legal arrangement called a ‘trust’. This is a formal legal document that sets out who should receive the payout and who is responsible for managing it.
When your policy is in trust, it is held separately from your estate. The payout is then managed by trustees and passed directly to your chosen beneficiaries. This helps make sure the money goes to the right people, in line with your wishes and without unnecessary delay.
Who is involved in a trust?
A trust is a legal arrangement with three key roles:
Settlor - the person who sets up the trust and places the policy into it. This is usually you.
Trustees - the people legally responsible for managing the trust and making sure the payout goes to the right beneficiaries. Choosing the right trustees is important, as they carry out your wishes. You can be one of the trustees.
Beneficiaries - the people who will receive the payout from the policy.
Once the trust is set up, these roles are defined in the legal document.
What are the benefits of putting a policy in trust?
Faster access to the payout - the policy can usually be paid without waiting for probate.
Clear control over who receives it - you decide who benefits, and trustees ensure your wishes are followed.
Potential inheritance tax benefits - because the policy sits outside your estate, it may not be counted in inheritance tax calculations.
What are the downsides of putting a policy in trust?
Putting a policy in trust is often helpful, but it is not right for everyone.
Once a policy is in trust, it can be less flexible. For example, changing beneficiaries or trustees may require a formal update rather than a quick amendment. You also give up some control, as trustees are responsible for managing the payout.
This is why it is important to set it up carefully at the start.
What about nomination of beneficiaries?
Some insurers now offer the option to nominate beneficiaries instead of using a full trust.
This allows you to state who should receive the payout without setting up a formal trust. This can be simpler to arrange and easier to update. However, nomination does not always offer the same level of control or potential inheritance tax advantages as a trust.
It can be a useful option in some situations, but it is not a direct replacement for a trust in every case. The right approach depends on your circumstances.
Setting up a trust with LifeSearch
If you take out life insurance through LifeSearch, we can help you set up a trust correctly from the start. We work with Genie to provide a standard trust solution that is widely accepted by insurers.
Genie also supports the coordination behind the scenes. This includes working with insurers, trustees and the necessary paperwork to make sure everything is completed and recorded properly.
This helps reduce the risk of errors and ensures the policy is set up to pay out as intended.
There is no cost to you for setting up a trust through us.
Get fee-free advice
If your circumstances have changed or it’s been a while since you reviewed your cover, it could be worth checking whether your policy still fits your needs.
At LifeSearch, our advisers can help you understand your options, explain what to consider before making any changes, and support you in finding the right cover for where you are now.