The use of trusts for life protection policies has nearly tripled in five years as more people try to prevent funds from being inaccessible during probate, new research reveals.
Almost three times as many protection policies were placed in trust this year compared with 2021, a Stonebridge survey of five-year sales data covering 8,000 policies suggests.
The number of life policies written in trust seen in analysis of one of Stonebridge’s six provider partners has risen from 5.3% in 2021 to 14.3% in 2026. The rate of adoption also rose year-on-year, climbing from 13.1% a year ago to 14.3% this year. Life insurance policies can be worth hundreds of thousands of pounds but, unless they are held in trust, the payouts enter probate with the rest of the policyholder’s estate, which means those funds are not immediately accessible.
John Scrivens, sales director at Stonebridge, said: “When people choose policies, they are often solely focused on the amount of cover, but their loved ones need the money in their pocket in order to benefit from it. Time can be a real factor.
“Using trusts protects beneficiaries from the nightmare of vital funds being locked up in probate, which makes them a crucial pillar of the advice brokers should be giving consumers.
“All too often, funds are withheld from the bereaved in their time of need because a trust wasn’t considered when the policy was taken out. Fortunately, times have changed and advisers are increasingly conscious of the circumstances in which trusts are most appropriate and their benefits.
Scrivens added: “We’ve been banging this drum for a long time, and it has rightly been identified by the FCA as an important focus area. The industry will be better for it, and consumers won’t be left needlessly vulnerable. Policies shouldn’t be placed in trust automatically, but we’re pleased that our network members are identifying increasing numbers of cases where trusts should be used.”
The findings come as the FCA’s Pure Protection Market Study final report revealed the regulator wants to encourage greater use of preparatory tools including trusts and nominated beneficiaries, which allow claims to be paid out more quickly.
