Life Insurance & Trusts

By TP Financial Solutions

11 May 2022

tp-financial2-april-2022-low-res-24.jpg

 If you're considering taking out a life insurance policy, your loved ones are more likely to benefit from it if it is 'written in trust'.

You may only be thinking about covering the mortgage and other debts you don't want your family to have to pay in the event of your death, but a life insurance in trust can also ensure that they get more of your money — instead of it going to the taxman as part of your inheritance tax bill.

Is life insurance taxed?

Life insurance isn't usually subject to any tax, but depending on how much your 'estate' is valued upon your death, that life insurance pay out could be subjected to a large inheritance tax bill instead of it being received in full by your loved ones.

Your estate is the value of everything you own, including legal rights, interests and entitlements to any assets. And if you're single or divorced, the threshold for having your estate subject to inheritance tax is £325,000.

This amount and below is free to be passed on to your beneficiaries (the family, friends and anyone else who you will inherit something from your estate) without tax. Any amount above this limit will be subjected to a 40% tax. So for example, when you die, if your estate was valued at £600,000, your inheritance tax bill would be £108,000, which is 40% of the £175,000 above the £325,000.

This means money would have to come out of your estate to pay the tax bill or your beneficiaries would need to pay it in order to receive what you have left for them.

Putting life insurance in trust

If your estate is valued higher than the tax inheritance threshold, your life insurance pay out will form part of your estate and thus be subjected to the 40% inheritance tax.

This can be a headache for the family you leave behind. They might end up having to use the remainder of your life insurance pay out to pay off some inheritance tax bill, rather than the mortgage, or any other debts that it was intended to pay off in the first place.

Writing your life insurance in trust means that even if your estate is subject to inheritance tax, you can leave behind some money that is just for your loved ones, or even to pay off your entire inheritance tax bill.

Surprisingly, the vast majority of life insurance policyholders don't have theirs put in trust, despite the obvious benefits. It may not always be for everyone, and may not apply to those whose estate is valued below £325,000. But most the time it's a decent piece of forward planning that could save your loved ones thousands of pounds. 

We can help if you need any guidance on this topic.

Tarnia Elsworth

Director and Protection Adviser.

Phone 01524 920015 Mobile 07951113654

Web tpfinancialsolutions.co.uk/protection

Email [email protected]

Latest news

1

Preston frozen dough brand has new celebrity shareholders Ant and Dec and Amy and Chris Cheadle

Preston frozen dough brand has new celebrity shareholders

18 Jul 2025

2

Wellbeing focused co-working space with its own pub in Burnley gets ready for launch Dave Scholes and Malcolm Ireland

Wellbeing focused co-working space with its own pub in Burnley gets ready for launch

18 Jul 2025

3

UK's pioneering Combat Air Flying Demonstrator is revealed Flying Combat Air Demonstrator

UK's pioneering Combat Air Flying Demonstrator is revealed

17 Jul 2025

4

A fresh brew for The Printed Cup Company The Printed Cup Company

A fresh brew for The Printed Cup Company

17 Jul 2025

5

Joe Diston from Beever and Struthers appointed to new Global IFRS leader for HLB International Joe Diston

Joe Diston from Beever and Struthers appointed to new Global IFRS leader for HLB International

17 Jul 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Preston Tech Connection: Web3 is Dead. Or is It?
July Longer Banner.jpg.jpg
LBV Hub Networking
29 Jul 2025 - 29 Jul 2025

Preston Tech Connection: Web3 is Dead. Or is It?

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 19:30

Preston Freelancer Meet-Up: July
Longer July Banner.jpg.jpg
LBV Hub Networking
31 Jul 2025 - 31 Jul 2025

Preston Freelancer Meet-Up: July

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Advantage: AI – A Workshop for Business Leaders – August 14th
Navy--Event Tile.png.png
LBV Hub Seminars
14 Aug 2025 - 14 Aug 2025

Advantage: AI – A Workshop for Business Leaders – August 14th

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

09:00 - 12:00

The Business Network Central & East Lancashire
LBV Header (24).png.png
LBV Hub Networking
21 Aug 2025 - 21 Aug 2025

The Business Network Central & East Lancashire

Mytton Fold, Langho, BB6 8AB

11:30 - 14:15

Morecambe Bay Walk
Walk.jpg.jpg
LBV Hub Awards
30 Aug 2025 - 30 Aug 2025

Morecambe Bay Walk

Arnside, CARNFORTH, LA5

09:30 - 14:00

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

North West Business Expo 2025
https---cdn.evbuc.com-images-880456273-4862066883-1-original.20241022-105445.jpeg.jpg
LBV Hub Exhibitions
24 Oct 2025 - 24 Oct 2025

North West Business Expo 2025

Bolton Stadium Hotel, Bolton, BL6 6SF

09:00 - 15:00

Lancashire Business Day 2025
241122lbvlancashiredaylhp0647web
Networking
27 Nov 2025

Lancashire Business Day 2025

Burnley FC , Burnley, BB10 4BX

12:00 - 17:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin