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When you write a life insurance policy in trust, you are placing it into a legal arrangement that sits outside your estate. This means that when you die, the payout goes directly to your chosen beneficiaries rather than into your estate to be distributed through probate.
The practical benefits are significant. Without a trust, a life insurance payout typically cannot be released until the estate has gone through probate a process that currently takes six to twelve months for straightforward estates, and up to two years when complications arise. With the average UK life insurance payout standing at £79,703 in 2024, having that money tied up for months at a critical time can place real strain on the people left behind. A trust removes that delay entirely. It also means the payout is not counted as part of your estate for inheritance tax purposes an increasingly important consideration given that HMRC collected £8.2 billion in inheritance tax receipts in the year to March 2025.
Despite these advantages, Swiss Re’s research found that only 18% of new UK life insurance policies were written in trust in 2023 meaning the vast majority of policyholders are leaving their families exposed to exactly these risks.
Yes and this is where the type of trust you have matters enormously.
There are two main types of trust used for life insurance in the UK: absolute trusts and discretionary trusts, and they work very differently in the context of divorce.
Absolute trusts name fixed beneficiaries at outset and those beneficiaries cannot be changed. If you wrote your policy into an absolute trust naming your spouse as beneficiary before your marriage broke down, the payout would go to them in the event of your death, regardless of whether you have since divorced. This is not a technicality it is legally binding. If your policy sits in an absolute trust and your ex-spouse is the named beneficiary, the only real option may be to cancel the policy and take out a new one under a different trust arrangement. We strongly recommend speaking to a qualified adviser before taking that step, as cancelling cover without replacement in place even briefly could leave you unprotected.
Discretionary trusts offer considerably more flexibility. Under a discretionary trust, the trustees have the power to decide how and to whom the payout is distributed from a defined class of beneficiaries. If your policy is held under a discretionary trust, it is usually possible to update the trust to remove your ex-spouse as a potential beneficiary and ensure the right people such as your children are properly covered. This typically involves completing a deed of appointment or a letter of wishes, and your insurer or a legal adviser can guide you through the process.
A trust requires at least one trustee to manage it and in many cases, a spouse or partner is appointed as a trustee when the policy is first set up. After a divorce, having your ex-spouse as a trustee on your life insurance policy is unlikely to reflect your current wishes, and could cause practical difficulties if a claim is ever made.
Fortunately, most discretionary trust deeds allow you to remove and appoint trustees. If your ex-spouse is currently a trustee, this should be one of the first things you address as part of your post-divorce financial review. Again, the exact process will depend on the terms of your trust deed, so checking the paperwork or asking an adviser to do so on your behalf is an essential step.
The problem is not that people don’t care it’s that post-divorce financial admin is vast, and life insurance trusts are rarely at the top of anyone’s list. Research from Legal & General found that nearly 900,000 divorced individuals in the UK have not updated their wills to exclude former partners, which suggests that updating trust documents an equally important but less visible task is likely overlooked on a similar scale. The same research found that only 7% of divorcees seek financial advice during the process, leaving the majority to navigate these decisions alone.
It’s also worth acknowledging that more than 73% of UK life policyholders are not directing their policy benefits at all, according to Swiss meaning a large proportion of people haven’t engaged with their trust arrangements even in stable circumstances. Divorce makes it all the more urgent to do so.
There are three practical steps worth taking as part of any post-divorce financial review.
First, identify what type of trust your policy is written under. Check your policy documents or contact your insurer to establish whether you have an absolute trust or a discretionary trust, as this will determine what changes are possible.
Second, review who is named as a beneficiary and who is acting as trustee. If your ex-spouse features in either role and that no longer reflects your wishes, take steps to update the arrangement where the type of trust allows.
Third, consider whether your overall trust arrangement still matches your current life. If you have dependent children, for example, you may want to ensure they are clearly named as the intended beneficiaries or that the trust gives trustees clear guidance on how the payout should be used on their behalf.
If your policy is in an absolute trust with your ex-spouse as beneficiary and you cannot make changes to it, the conversation you need to have is with a protection adviser about replacing the policy with a new arrangement structured correctly from the outset.
Related Resources:
How to change your life insurance beneficiary after divorce