The Simple Step That Can Save Your Family 40% Tax
Most people don't realise that a life insurance payout can be subject to a 40% Inheritance Tax bill. A simple legal instruction, called a trust, can prevent this.
"Policy in Trust" IHT Saver
Life Insurance Payout Amount
Without a Trust
Payout Amount
£250,000
40% IHT Bill*
-
Your Family Receives
WITH a Trust
Payout Amount
£250,000
40% IHT Bill
- £0
Your Family Receives
£250,000
Total Amount Saved for Your Family:
Setting up a trust is simple and our advisers can help you do it for free.
Ask an Adviser About TrustsWhy is a Trust So Important?
1. It Avoids a 40% Inheritance Tax Bill
Without a trust, your life insurance payout is added to your estate. If your total estate value is over the tax-free threshold (£325,000 as of August 2025), the payout could be taxed at 40%. By placing the policy in trust, it falls outside your estate, ensuring the full amount goes to your beneficiaries, tax-free.
2. It Skips the Lengthy Probate Process
Without a trust, your family may have to wait for probate (the legal process of validating a will), which can take 6-12 months or more, before they can access the money. A trust bypasses probate, allowing the trustees to claim the money in a matter of weeks, providing crucial financial support when it's needed most.
Disclaimer: This calculator is for informational and illustrative purposes only and does not constitute financial, legal, or tax advice. The figures shown are based on the Inheritance Tax rate of 40% as of August 2025 and may be subject to change. Your personal circumstances, including the total value of your estate, will affect your actual IHT liability. We strongly recommend speaking with a qualified financial adviser to understand how a trust could benefit your specific situation.