Policy held in trust

Most international IUL policies, and many PPLI structures, are held by an offshore trust or company as policyholder instead of the person whose life is insured. The trustees become the policyholder. They hold the policy for the beneficiaries named in the trust deed and receive the death benefit when a claim is paid.

Why policies are held in trust

• Control over who receives the proceeds. The deed sets who benefits, when and in what shares, including children under 18 and beneficiaries living in different countries.
• Speed of payment. The insurer pays the trustees on proof of death, so the family has cash while the estate itself goes through probate.
• Outside the deceased's estate. Where the trust is effective under the law that applies, the proceeds belong to the trust, so they sit outside the estate of the person who died for succession and, in many countries, for inheritance or estate tax.

In practice

The trust is usually set up before the application, so the trustees apply for the policy, sign the acceptance and pay the premiums from money the settlor gives them. A company can hold a policy in the same way, through its directors. A policy already owned personally can usually be assigned into trust later. For UK tax, a gift assignment is not a chargeable event, but the policy can count as a gift for inheritance tax, valued at no less than the premiums paid less any sums taken out.

In an international IUL

An international IUL is usually owned by an offshore trust or company, and in some cases personally, and ownership is agreed before underwriting. Paid to the trustees, the US dollar death benefit gives the family liquidity for estate taxes, debts or equalising an inheritance between children, so property or a family business can be kept instead of sold under time pressure.

In a PPLI structure

A trust or foundation is often the policyholder of a PPLI structure. The insurer holds legal title to the assets in the segregated account, the trustee holds the structure for the beneficiaries, and an investment manager approved by the insurer runs the portfolio. The deed decides how the death benefit is distributed, giving one succession route for a family with assets and heirs in several countries.

Common questions

Is a life policy in trust outside my estate for UK inheritance tax?

HMRC counts the proceeds of a policy someone owns on their own life as part of their estate. A policy held in trust is treated like other settled property instead, provided the settlor cannot benefit from the trust. Premiums paid to the trustees are gifts: exempt where they qualify, for example as normal expenditure out of income or within the £3,000 annual exemption (2026-27), and otherwise, for most trusts, counted against the £325,000 threshold (2026-27), with inheritance tax at 20% on transfers above it.

Do trusts pay inheritance tax in the UK?

Most trust property is relevant property, with a charge at each 10-year anniversary on value above the threshold and an exit charge of up to 6% when assets leave the trust. Since 6 April 2025, whether non-UK assets in a trust are within these charges depends on the settlor's long-term UK residence (for a settlor who died before 6 April 2025, their domicile when the trust was made).

Who is taxed on a gain from a policy held in trust?

For UK income tax, a chargeable event gain is taxed on the settlor while the settlor is alive and UK resident (for a bare trust, on the beneficiary). If the settlor has died or is not UK resident, UK-resident trustees are taxed. Where the trustees are not UK resident, the gain can instead be taxed on UK-resident individuals who benefit, under the transfer of assets abroad rules. An international IUL or PPLI structure in trust comes under the same chargeable event rules as an offshore bond.

Go deeper: family protection and estate planning.

Sources

• HMRC IHTM20012: life policies and Inheritance Tax
• HMRC: Trusts and Inheritance Tax (updated 6 April 2025)
• GOV.UK: Inheritance Tax, gifts and exemptions
• HMRC: Inheritance Tax if you're a long-term UK resident (6 April 2025)
• HMRC helpsheet HS321: gift assignments and chargeable events
• ITTOIA 2005 s.465: person liable, individuals (including settlors)
• ITTOIA 2005 s.467: person liable, UK resident trustees
• IHTA 1984 s.167: transfer of a life policy

Last reviewed November 2026.