Should Your Life Insurance Be Owned by a Trust?

Some New Zealanders choose to have their life insurance owned by a trust rather than in their own name, usually so that any payout can be directed and protected according to their wishes. Whether it makes sense for you depends on your circumstances, and it is a decision to make alongside legal advice rather than on your own.

What does it mean for a trust to own a life insurance policy?

Ownership simply refers to who legally holds the policy. If a trust owns it, the trust is the policy owner and is generally the party that would receive the payout, to be applied according to the trust’s terms. This is different from naming a beneficiary on a personally owned policy, and the two approaches can lead to quite different outcomes for your family.

Why do some people use a trust for life insurance?

Common reasons include wanting a payout to be managed for children or other beneficiaries over time, keeping the proceeds separate from personal assets, or fitting the insurance into an existing trust and estate structure. For people with blended families, business interests, or significant assets, having clear control over where a payout goes can be appealing.

What are the downsides or things to watch?

Trusts add complexity and ongoing responsibilities, and they are not the right answer for everyone. The way a policy is set up, who the trustees are, and how the trust is worded all matter, and mistakes can have consequences that only surface at claim time. Trust law and the rules around it also change over time, which is one reason this is firmly a “get advice” area rather than a do-it-yourself one.

Does owning insurance in a trust change what it costs?

The premium for the underlying cover is generally based on the life insured — things like age, health, and the amount of cover — rather than on who owns the policy. The trust structure sits around the policy. There can, however, be costs involved in setting up and maintaining a trust, which is a separate consideration from the insurance premium itself.

How do I decide if this is right for me?

This is one of those decisions that sits at the meeting point of insurance, legal, and sometimes tax considerations. A good starting point is to be clear about what you want to happen to a payout and who you want to look after, then work with a financial adviser and a lawyer to decide whether a trust is the right tool — or whether a simpler beneficiary arrangement does the job. Our article on when to write a will is a useful companion if you are thinking about your wider estate.

If you would like to talk through how your life cover fits with your bigger picture, you are welcome to get in touch for a no-obligation conversation.

The information in this article is general information only and is not intended as financial, legal, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser, lawyer and/or tax specialist in relation to your own circumstances and before acting on this information.