Putting a personal protection policy into trust can help protect your client’s loved ones from inheritance tax, or avoid probate.

Designed to be used with your clients, this tool helps you explain the benefits of putting a personal protection policy into trust. It also makes it easy for you to set up a trust for your client.



It’s a good idea to supplement the discretionary, survivor’s discretionary and flexible trust with a letter of wishes which is a non-binding way of letting the trustees know who the settlor would like the policy proceeds to benefit.

Personal trusts explained

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Trusts and life insurance policies



Trusts and tax



Trusts and beneficiaries



Important points to note

It's important to understand that in some cases, the trust itself might have to pay tax. However in the majority of cases, there are unlikely to be significant tax considerations, before the life policy pays out and also after a claim, as long as the money is paid out of the trust immediately.

However tax considerations can become increasingly important if the money is held in trust for longer and professional advice may be needed to help with this.

Certain types of policy such as the Family and Personal Income Plan (FPIP) policy usually pays out a monthly amount after the policyholder’s death for the length of time they decided so the potential for tax within the trust is higher.

The different types of trust are treated differently for IHT purposes. Discretionary, Survivors Discretionary and Flexible trusts are all types of relevant property trusts (RPT) and are largely treated in the same way; Absolute trusts are treated as a Potentially Exempt Transfer (PET).

For more information about tax please refer to our technical guides, or seek specialist advice.