Life Insurance Trusts

Ensure your money goes to the right place if the worst happens

What is a trust?

Here's what you need to know about putting your life insurance policy into a trust

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  • Normally, placing a policy in trust is an 'irrevocable' act. This means once the policy is in trust this decision can't be changed later on, so it's important to carefully consider if putting a policy in trust is right for you. 
  • You can put a life insurance policy into trust as soon as it starts, or at a later date. 
  • There are different types of trust, but we offer three - fixed, flexible and split. 
  • This is done with LV= by completing a trust document which sets out the terms and conditions that the trust can operate under. 
  • Our Online Trusts tool can help you decide on the right type of trust and set everything up online. Please note this tool is only available for Protection policies, and it's not to be used with Bonds or savings plans.
The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

The different types of trust

Not every provider offers every type of trust, but it’s good to know what’s out there.

Absolute or fixed or “bare” trusts

Absolute trusts, also called fixed trusts or bare trusts, are trusts where you can’t make any changes once the trust has been created. With these trusts, if you die while one of the beneficiaries is under 18 (16 if in Scotland) the trustees will manage the money until the child comes of age.

    Flexible trusts

    With a flexible trust you must name one “default” beneficiary. This default beneficiary will receive the full payout unless the trustees choose to allocate some funds to one or more discretionary beneficiaries.  

      Split trusts

      If you have life insurance with critical illness cover, then you may want to choose a split trust. This will allow you to receive payouts from the critical illness cover while putting the life insurance payout into trust.

        Discretionary trusts

        With discretionary trusts, more of the decisions are made by the trustees but you also don’t have to fix in beneficiaries, the sum received or when the beneficiaries will receive it.  

        Once you have passed away the trustees will then make the decision on who gets what and when. You can write a letter of wishes that trustees can use as a guide when making decisions, but they don’t have to adhere to the instructions verbatim.

        Please note, LV= does not offer discretionary trusts. 

          Survivors discretionary trust

          This is a joint life insurance trust that allows the surviving policy owner to inherit the payout before any other named beneficiaries. If the survivor dies within 30 days of their partner, then the other beneficiaries will receive the payout as with any other trust.  

          Please note, LV= does not offer discretionary trusts. 

            TRS notification

            Trust Registration Service notification

            Pen and paper

            As part of the UK's implementation of the Fifth Money Laundering Directive, new rules were introduced about trust legislation.

            Trusts related to LV= protection plans that don't hold a surrender value won't need to be registered unless a claim is paid, and even then only in certain cases. Other types of policy held in trust may need to be registered. For further information please see our Trust Registration Service FAQs.

            Should I put my life insurance policy into trust?

            Understand both the advantages and disadvantages before taking out a life insurance policy in trust

            Advantages of a trust

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            • The policy can't be taken out of trust later on, meaning the proceeds are paid to the right person or people. This way, you can be sure that when you pass away, the money goes where you want it to.  
            • Putting a life insurance policy into trust can be beneficial for those not married or in a civil partnership, as your partner can receive the funds as intended.  
            • Proceeds are paid out quickly; we won't need to wait for probate (which can sometimes take several months). 
            • Helps avoid inheritance tax - the proceeds won't normally be included in the deceased's estate and can usually pass tax-free to whoever is chosen as beneficiaries. 

            Disadvantages of a trust

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            • If a policy is written in trust, you cannot change your mind and take the policy back out of trust later on. 
            • Control over the policy is usually given to the trustees so you can't make changes to it. However, when using our Online Trust tool the forms automatically make the settlors a trustee so you still retain some ownership (to make changes). 
            • You can't benefit from the policy (this isn't usually a problem if you're the only policy owner, but it can get complicated with things like joint life policies). 

            Important information

            Before we start, you should know…

            If you're in any doubt, you should speak to a solicitor.

            Computer desk with tea, piggy bank and family picture
            • There are different types of trust available, and it may not always be clear which should be used so if you're in any doubt you should seek legal advice. 
            • The information on this page shouldn't be taken as advice. Once you've put a policy in trust you can't change your mind later, so you need to be really sure that it's right for you. 

            Who is needed to set up a trust?

            The settlor

            This is the person or people who set up the trust and put their life policy into it. They are the current owners of the life insurance policy. The settlor chooses the trustees and decides who they would like the beneficiaries to be.

            The trustees

            These are the people responsible for looking after the policy put into trust on behalf of the beneficiaries who will get the money when the life policy pays out. We have produced a guide on what it means to be a trustee, which you can read below (PDF opens in a new tab.

            Guide to being a trustee (PDF, 1.8MB)

            The beneficiaries

            These are the people who will get the money from the trust. Beneficiaries can be anyone, but most people make their children or spouse the beneficiary of their life insurance trust.

            Types of trusts LV= offers

            LV= offers three types of trusts - fixed, flexible and split

            We've provided a brief summary of each of our trust documents, and a quick way to download the deed and guide for each, which covers each in more depth. Other providers may offer different trust types, so please bear this in mind when researching into trusts.

            Fixed Trust

            What is it? 

            A trust which gives a fixed (non-changeable) instruction to trustees on how to split the proceeds to specific beneficiaries, which can't be changed in the future. 

            What products can it be used for? 

            Normally a fixed trust is used for life protection, which will pay out a lump sum when the settlor dies. But you can use it for other things too, such as an investment bond. 

            Trust documents

              Flexible Trust

              What is it? 

              A trust which allows the trustees to change the default beneficiaries in the future from a range of potential beneficiaries. 

              What products can it be used for? 

              Normally a flexible trust is used for life protection, which will pay out a lump sum when the settlor dies. But you can use it for other things too, such as an investment bond. 

              Trust documents

                Split Trust

                What is it? 

                A trust to let you split out the benefits of a Life with Critical Illness policy so that the Critical Illness payment will go to your client, or the death claim will go to the trustees to provide to the specified beneficiaries. 

                Our split trust can also be used if you have a life protection policy and you want the terminal illness payment to be paid to you by the trustees in the event you are diagnosed with a terminal illness, but the death claim to be paid to the beneficiaries. However, if you are considering this, we'd recommend you discuss this with a financial adviser or a solicitor. 

                What products can it be used for? 

                A split trust should normally only to be used with a combined Life and Critical Illness policy. Whilst it can be used if you have a life protection policy, and you want the terminal illness payment to be paid to you in the event you are diagnosed with a terminal illness, we'd recommend you discuss this with a financial adviser or a solicitor.  

                Trust documents

                  Guides on trusts and trustees for life insurance

                  Have a read of our guides - they might help you understand Trusts and Trustees in relation to life insurance policies or investments. You can get this and other documents from us in braille, large print or audio by contacting us.

                  How to use LV='s Online Trusts tool

                  Our Online Trusts tool will guide you through the process of setting up a trust

                  Here's how it works: (Please note this tool is only available for Protection policies and is not to be used with bonds or savings plans.)
                  • Number 1 icon
                    Answer the simple questions and once complete, it will take you to the most appropriate trust form we offer based on the answers you have given.
                  • Number 2 icon
                    If you are happy to continue, complete the names and email addresses of all Settlors, Trustees (if applicable) and their witnesses.
                  • Number 3 icon
                    Complete the remaining parts of the form online.
                  • Number 4 icon
                    You will be prompted to sign the form. This can be done either using a touch screen or a mouse.
                  • Number 5 icon
                    Once the first person has signed, the form will be automatically sent to the next person to complete their details and sign.
                  • Number 6 icon
                    Once everyone has signed you will be notified via email that the signing process is complete and the form will be automatically returned to LV=.

                  Ready to set up your trust online?

                  Please note that when using the online trust tool, all involved parties, including witnesses, will receive a complete copy of the finalised trust. This means that the names and addresses of all parties will be visible to the witnesses. Witnesses should be aware that this information is protected under Data Protection legislation and must not be used or shared under any circumstances.

                  If you do not wish for witnesses to obtain this information, you will need to use a paper trust instead.
                  Launch the Online Trusts tool

                  frequently asked questions

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