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You set up a trust for life insurance by completing a legal form that places the payout under the control of chosen trustees, rather than sending it directly into your estate.
This helps ensure the money goes to the right people, at the right time, and without unnecessary delays.
Most insurers will provide a trust form when the policy is arranged, and in many cases, it can still be added later if your circumstances change.
A protection advisor can help you understand how this works with your policy and explain the steps involved clearly.
What is a Life Insurance Trust?
A life insurance trust is a legal arrangement that allows you to separate your policy’s payout from your estate.
Rather than going through probate or being included in your total assets, the payout is passed into the trust and handled by people you’ve named as trustees.
This can help avoid delays after your death, reduce the chance of disputes, and may limit the impact of inheritance tax.
It is also a way to protect the money if your beneficiaries are children or others who may need support managing it.
The trust exists solely to hold and manage the proceeds of your life insurance and only becomes active when the policy pays out.
Who Can Set One Up?
Anyone taking out life insurance can usually set up a trust at the same time.
There is rarely a cost for this, and insurers will typically provide the required forms as part of the application. It is not limited to large policies or complex estates.
Many people choose to use a trust if they are leaving money to children, planning to cover funeral costs, or want the payout handled separately from the rest of their estate.
Trusts can also help reduce delays in payout and provide more clarity on how the money should be distributed.
If you already have a policy, it is still possible to set up a trust in many cases. We can check with the insurer and help you work through the process.
When Should You Do It?
The best time to set up a trust is when you first take out your policy. This allows the trust to be properly structured from the beginning and reduces the need for any later changes.
If your circumstances change over time, you can still explore the option later on. This is common for people who have had children, married or divorced, or reviewed their will.
Your protection advisor can speak to your insurer, confirm what is possible, and help with the next steps.
Who Should You Appoint as Trustees?
Trustees are the people who will manage the payout if your policy is held in trust.
You name them when the trust is set up, and they have a legal responsibility to follow your instructions and act in the interests of your chosen beneficiaries.
These are usually people you know and trust, such as family members or close friends. Some people choose to include a professional, such as a solicitor.
The trustees should understand what the trust is for and be willing to carry out your wishes when the time comes.
If you are unsure who to choose, your protection advisor can talk through how the process works and what trustees are expected to do.
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What Does a Protection Advisor Do?
Your protection advisor can help explain how trusts work and guide you through completing the paperwork provided by the insurer.
While we do not give legal advice, we will make sure you understand the forms, the structure of the trust, and what to expect at each step.
If you are applying for new life insurance, we will help you decide whether a trust is right for your needs. If your policy already exists, we will contact the insurer and confirm whether it can be added now.
For more complex scenarios involving estate planning or tax questions, we may suggest speaking to a solicitor alongside your policy application.
Why Might You Put Life Insurance in Trust?
The main reason is to make sure the money is passed on without delay. If a policy is written in trust, it is usually paid to the trustees without needing to go through probate.
This can help your loved ones get access to the money more quickly, especially if it is needed for urgent expenses such as a mortgage or funeral.
Another reason is control. A trust allows you to say exactly who should receive the payout, when they should receive it, and who will manage it in the meantime.
This can be helpful if your beneficiaries are young, vulnerable, or if you want the money handled in a specific way.
In some cases, a trust could also reduce the amount of inheritance tax payable on your estate, depending on the overall value and how your assets are structured.
Every situation is different, and your protection advisor can help you understand how a trust fits into the wider picture.
