Do you need probate to claim life insurance?
It depends on one thing: whether the policy was written in trust. In trust, the money goes straight to the beneficiaries. Not in trust, it belongs to the estate and the insurer decides whether it wants a grant.
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The short answer
- A policy written in trust pays out without a grant. The trustees claim with the death certificate and pass the money to the beneficiaries. It is outside the estate and outside inheritance tax.
- A policy not in trust pays the estate. The insurer treats the sum like a bank balance: below its own limit, it pays the executor on the death certificate; above it, it wants the grant.
- A joint policy pays the surviving policyholder directly. No grant.
- A policy assigned to a mortgage lender pays the lender. No grant.
- Check the paperwork or ask the insurer which kind it is. "In trust" is not obvious from the policy name.
Policies written in trust
When a life policy is placed in trust, the policyholder gives the right to the payout to trustees (usually themselves plus a family member) to hold for named beneficiaries. On death, the trustees claim from the insurer. The insurer needs the death certificate, the trustees' identification and the trust form it holds on file. It pays the trustees, who pay the beneficiaries. Because the money was never the deceased's to leave, it does not form part of the estate, no grant is required, and it is not counted for inheritance tax.
Insurers and advisers encourage trusts for exactly these reasons, and many term policies sold alongside mortgages or through employers are in trust. If the deceased was one of the trustees, the surviving trustee claims alone; if there is no surviving trustee, the insurer will explain how to appoint one.
Policies not in trust
A policy that was never put in trust is simply a contract between the deceased and the insurer, and the sum assured is owed to the deceased's estate. It is distributed under the will or the intestacy rules, and it counts towards the estate for inheritance tax.
Whether the insurer will pay without a grant is a matter of its own limit, like a bank. Many insurers pay sums up to a set figure to the executors or the entitled relative on the death certificate, a claim form and an indemnity; above the figure, they require the grant. The limits vary widely between insurers and are lower than banks' at some. Ask the claims team before assuming either way.
Because a policy not in trust can add substantially to an estate, it is a common reason a modest estate ends up needing a grant: a £100,000 term policy, not in trust, has to be paid to someone with authority.
Joint, mortgage and over-50s policies
- Joint life, first death. The usual arrangement for couples. The policy pays out to the surviving policyholder on the first death and then ends. No grant, no estate.
- Decreasing term assurance assigned to a lender. Some older mortgage policies were formally assigned to the lender. The insurer pays the lender, the mortgage is cleared, and any surplus goes to the estate. No grant for the payout; the surplus follows the ordinary rules.
- Over-50s plans. Marketed to cover funeral costs. Usually not in trust, so the payout belongs to the estate, but many are small enough to fall within the insurer's limit and some let the policyholder nominate a funeral director to be paid directly.
- Endowments and whole-of-life policies with a surrender value. Treated as an estate asset; the insurer's limit applies.
- Employer death-in-service cover. Paid through the employer's discretionary trust like a pension. No grant. See pensions.
How to claim
- Find the policy. Bank statements show premiums; the Unclaimed Assets Register and the Association of British Insurers can trace forgotten ones.
- Tell the insurer and ask three questions: is it in trust, what is the sum assured, and will you need a grant?
- Send the death certificate and the claim form. Trustees claim if in trust; the executor or entitled relative if not.
- If the insurer wants a grant, add the sum assured to the estate valuation and apply.
Most insurers pay within a few weeks of a complete claim. Interest is usually added from the date of death or the date of claim.
Common questions
Does life insurance go through probate in the UK?
Only if the policy was not written in trust. A policy in trust is claimed by the trustees and paid to the beneficiaries outside the estate, with no grant. A policy not in trust pays the estate, and the insurer will pay the executor without a grant only if the sum is within its own limit.
How do I know if a life insurance policy is in trust?
Ask the insurer; it holds the trust form if one was completed. The original policy documents may include a trust deed or a 'nomination of trustees' page. A policy sold with a mortgage or through a financial adviser is often in trust; one bought directly online often is not.
Does a life insurance payout count for inheritance tax?
If the policy was in trust, no: the payout is outside the estate. If it was not in trust, yes: the sum assured is added to the estate and taxed at 40 per cent above the available allowances, unless it passes to a spouse or civil partner. This is the main reason policies are put in trust.
Who claims on a joint life insurance policy?
The surviving policyholder. A joint life, first death policy pays out to the survivor directly on the first death and then ends. No grant is needed and the money is not part of the deceased's estate.
Will an insurer pay life insurance without probate?
Insurers pay trust policies without a grant as a matter of course. For policies not in trust, most will pay sums below their own limit to the executor or entitled relative on the death certificate, a claim form and an indemnity, and require a grant above it. Limits vary between insurers, so ask.
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Important
Solace is not a firm of solicitors and does not provide legal, tax or financial advice. We are an estate administration service and we are not regulated by the Solicitors Regulation Authority, the Financial Conduct Authority or any equivalent body. Nothing in this guide constitutes legal, tax or financial advice, and no solicitor–client relationship is created by reading it.
This article is general information only. It reflects the position in England and Wales at the date shown above; the law and the figures change, and Scotland and Northern Ireland differ in important respects. It may not apply to your circumstances. Whether a particular estate needs a grant is ultimately decided by the organisations holding the assets, and their limits change. Administering an estate carries personal legal responsibility, and you should obtain advice from a qualified solicitor, accountant or other regulated professional where appropriate. Always check current rates, fees and deadlines against GOV.UK before acting.