Life Assurance Written in Trust: Deed Drafting and Structures for International Families

Writing a life assurance policy into trust is one of the most valuable and yet most frequently misunderstood steps in financial planning. Done correctly, it removes the policy proceeds from the deceased's estate (potentially saving 40% inheritance tax in the UK), ensures the money reaches beneficiaries quickly (without waiting months for probate), and allows the policyholder to specify who receives the money and on what terms.

For internationally mobile individuals and families — those who may be resident in the UK, Cyprus, UAE, or another jurisdiction, or who split their time across multiple countries — writing a policy into trust raises additional complexity. Which jurisdiction's law should govern the trust? Are the beneficiaries in a country that recognises trusts? Is the policy itself issued in a jurisdiction where trust assignment is legally effective?

This guide examines the practical mechanics of writing life assurance into trust, the choices available to international families, and the issues that arise when beneficiaries, policy assets, and trustees are in different jurisdictions.

As of 2026, trust law, succession law, and the tax treatment of trust-held assets vary significantly between jurisdictions. This guide is informational only. Specialist legal and tax advice is essential for internationally situated trust arrangements.

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Why Write Life Assurance Into Trust?

Speed of Payment

Without a trust, life assurance proceeds are paid into the deceased's estate. The estate cannot be distributed until the executor obtains a grant of probate (or letters of administration). In England and Wales, as of 2026, the probate process routinely takes six to twelve months or longer. During this period, the family may have no access to funds from the policy.

When a policy is written in trust, the trustees — who are separate legal persons from the deceased — can request payment directly from the insurer without waiting for probate. Claims can often be settled within weeks.

Inheritance Tax Efficiency

In the UK, life assurance proceeds paid into an individual's estate are counted as part of the estate for inheritance tax (IHT) purposes. IHT is charged at 40% on the value of the estate above the nil-rate band (currently £325,000, with an additional residence nil-rate band of up to £175,000). A £2 million life policy paid into the estate could generate an IHT liability of £700,000 or more on the policy proceeds alone.

When the policy is held in trust, the proceeds are not part of the life assured's estate for IHT purposes — they pass to the trustees and then to the beneficiaries outside the estate, free of IHT.

Note: This analysis applies to UK domiciled individuals or UK sited assets. The IHT treatment of trusts is subject to periodic reform. The government consulted on changes to the IHT treatment of trusts in 2024, and further changes may be announced. Seek up-to-date advice.

Control Over Distribution

Without a trust, the policy proceeds fall into the estate and are distributed according to the will (or, if there is no will, intestacy rules). With a trust, the trustees can direct the proceeds to the beneficiaries in whatever manner is most appropriate — for example, holding funds for minor children until they reach a specified age, or distributing to a surviving spouse in a way that does not inadvertently affect means-tested benefits.

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Types of Trust Used for Life Assurance

Discretionary Trust

The most flexible and most commonly used trust for life assurance in the UK. The trustees have discretion to decide how to distribute the trust fund among a defined class of potential beneficiaries (the "class" typically includes the spouse, children, and other named dependants). The policyholder (as settlor) can express their wishes in a letter of wishes — a non-binding document that guides the trustees but does not constrain them.

Advantages: Maximum flexibility; trustees can respond to changed family circumstances at the date of claim; IHT-efficient.

Disadvantages: Discretionary trusts are "relevant property" trusts and are subject to IHT periodic charges (every 10 years) and exit charges (when assets are distributed). If the trust fund is modest and well below the nil-rate band at each anniversary, these charges are nil or minimal. For very large policy sums, periodic charges may apply.

Bare (Absolute) Trust

The beneficiary is fixed and irrevocable at outset. The trustee holds the policy on behalf of the named beneficiary absolutely — there is no discretion. When the policyholder dies, the proceeds belong to the named beneficiary as of right.

Advantages: No periodic or exit IHT charges (the trust property is treated as belonging to the beneficiary for IHT purposes). Simple and transparent.

Disadvantages: The beneficiary cannot be changed after the trust is established. If the named beneficiary predeceases the life assured or circumstances change materially, the outcome may not be what was intended.

Split Trust (Retained Benefits Trust)

A structure designed to allow the policyholder to recover policy benefits related to critical illness or total permanent disability during their lifetime — which would otherwise fall into the trust and become inaccessible to them. The life assurance benefit goes to the trust (for the benefit of dependants on death), but the critical illness or living benefit is retained by the life assured.

This is particularly useful for whole of life policies or comprehensive protection plans that cover both death and critical illness under a single policy. Without a split trust, the critical illness proceeds would be paid to the trustees rather than directly to the ill policyholder, creating an unnecessary step.

International Trust Structures

For internationally situated families, there are additional trust options:

Offshore Discretionary Trust: A trust established under the law of an offshore jurisdiction — Isle of Man, Guernsey, Jersey, Cayman, or BVI — and administered by professional offshore trustees. Offshore trusts offer certain advantages for internationally mobile clients: they are neutral (not associated with the home country's tax or succession law), widely recognised in common law jurisdictions, and can hold assets in multiple currencies and asset classes.

Purpose Trust (BVI/Cayman): A purpose trust has no individual beneficiaries — it exists to fulfil a defined purpose. Used for complex estate structures, not typically for straightforward life assurance.

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Drafting the Trust Deed: Key Clauses

A life assurance trust deed should address:

1. The Trustees

Name at least two trustees (a sole trustee creates administration difficulties and may not be acceptable to the insurer). For a personal arrangement, the trustees are typically the policyholder's spouse or partner plus one or two other trusted adults. For international families, at least one trustee should be resident in the jurisdiction where the trust is governed.

For offshore trusts, a professional trustee company (regulated in the offshore jurisdiction) is typically required or strongly advisable.

2. The Beneficiary Class

Define who can benefit. A well-drafted discretionary trust typically includes:

• The spouse or civil partner
• The children (including step-children and potentially adopted children)
• The grandchildren
• Any other person the trustees and/or settlor wish to include (sometimes expressed as "any person or class of persons nominated by the settlor in writing")

For international families, ensure that the beneficiary class is broad enough to include beneficiaries in multiple jurisdictions without inadvertently excluding someone due to geographic or status limitations.

3. The Governing Law

Specify the law of the jurisdiction that governs the trust — this determines how disputes are resolved, what the trustee duties are, and how the trust is interpreted. UK trusts are typically governed by English and Welsh law (or Scots law). Offshore trusts are governed by the law of their offshore jurisdiction.

For international families, choosing the governing law is a material decision. The law of the policyholder's country of domicile, the country of policy issue, or a neutral offshore jurisdiction are all candidates.

4. Trustee Powers

Broad investment, distribution, and administration powers should be specified. Trustees with insufficient powers may find themselves unable to manage the trust fund effectively — for example, unable to hold foreign currency assets or invest in overseas securities.

5. Protector (Optional)

Some offshore trust deeds include a protector — an individual or company (sometimes the settlor's trusted adviser) with the power to oversee the trustees, replace them if necessary, and consent to certain actions. This provides an additional layer of governance and is common in offshore structures holding substantial assets.

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International Issues

Forced Heirship

In many civil law jurisdictions (France, Germany, Spain, many Arab states under Sharia), a proportion of an individual's estate is reserved by law for specified heirs (children, spouses). This "forced heirship" overrides testamentary freedom — you cannot disinherit a forced heir, regardless of what your will says.

The interaction of forced heirship with a trust holding life assurance depends on the jurisdiction. In some countries, assets held in a trust may still be included in the "notional estate" for forced heirship calculation. In others, trust assets genuinely fall outside the calculation. This is one of the most complex areas of international estate planning, and specialist cross-border legal advice is essential.

Recognition of Trusts in Civil Law Countries

Many countries outside the common law world (including most of continental Europe, the UAE under onshore UAE law, and various others) do not have a domestic trust law. A UK-law discretionary trust may not be directly enforceable in these jurisdictions. However, many countries that are party to the Hague Convention on the Law Applicable to Trusts (1985) recognise and give effect to foreign law trusts — even if they have no domestic trust law. As of 2026, the UAE, France, Germany, and others are Hague Convention signatories with varying degrees of trust recognition.

Choice of Insurer and Policy Jurisdiction

If the life assured is non-UK domiciled — for example, a UAE resident buying a policy through an Isle of Man insurer — the policy may be subject to Isle of Man law, and the trust must be consistent with both the policy jurisdiction and any applicable UK or UAE succession or tax rules. The insurer should confirm that they will honour a trust deed under the chosen governing law before the trust is established.

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Practical Steps: Writing a Policy Into Trust

1. Select the appropriate trust type (discretionary, bare, split, offshore) in light of your family structure, domicile, and long-term objectives.
2. Draft the trust deed — with a specialist solicitor in the governing jurisdiction.
3. Complete the insurer's trust deed (most UK insurers provide their own trust deed; use this as a starting point, but take legal advice on whether it is adequate for international families).
4. Appoint trustees who are willing to act, understand their duties, and are resident in an appropriate jurisdiction.
5. Complete the nomination of beneficiaries (for insurers that require a separate nomination form).
6. Write a letter of wishes — a non-binding but important document that guides trustees on how you would like the fund distributed.
7. Review the arrangement at regular intervals — whenever family circumstances change, the policyholder's domicile changes, or new succession law applies.

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How Global Investments Can Help

Global Investments advises internationally mobile clients on the structuring of life assurance in trust — from selecting the appropriate trust type for a UK-resident client to advising on offshore trust structures for clients whose families are split across multiple jurisdictions.

We work with specialist trust lawyers in the relevant governing jurisdictions, coordinate with the life assurance carrier to ensure the trust deed is accepted and effective, and advise on the ongoing administration and review of trust arrangements as family and financial circumstances evolve.

Contact Global Investments to discuss how your life assurance policies should be held in trust.

Trust law, IHT treatment, and succession law vary by jurisdiction and change regularly. This guide is informational only. Specialist legal and tax advice is essential.