If you died with Life Insurance
in place, normally the money would form part of your estate. This can become a problem if the total of your estate is higher than the current threshold for Inheritance Tax because anything over will be charged at 40%. Keeping the money out of your estate can become a large saving.
Putting a life insurance policy into trust
is a way of moving the proceeds of the policy out of your estate, while making sure that the money is provided to the right people quickly.
More information on trusts