Group life trust

~3 min read

Category: Group life · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-10

In short: A group life trust is the discretionary trust that holds the group life insurance policy for the benefit of the employees and the employees’ nominated beneficiaries. The trust performs two essential functions: it keeps the policy proceeds outside the deceased employee’s personal estate for inheritance tax purposes; and it enables prompt payment of the lump sum without waiting for grant of probate.

Category: Group life Also known as: Discretionary group life trust Trust type: Discretionary Related concepts: Master trust group life, Group life nomination, Trustee Act 2000

Definition

A group life trust is established by a trust deed (the “principal trust deed”) signed by the employer in its capacity as settlor and the chosen trustees. Trustees may be the employer’s directors, individual professional trustees, or a corporate trustee (often the insurer’s master trust corporate trustee). The trust holds the policy and exercises discretion to pay the proceeds to a member’s nominated beneficiaries.

Legal / Regulatory basis

The trust is established under English (or Scots) trust law. Trustees owe statutory and common law fiduciary duties including the duty of care set out in the Trustee Act 2000, the duty of investment under the Trustee Act 2000 (where relevant), and the duty to act in good faith in the beneficiaries’ interest. For excepted group life policies, the trust must comply with the conditions in s.480 ITTOIA 2005 to qualify for excepted status.

Scope of cover

Most modern group life trusts are master trusts operated by the insurer or by an independent trustee firm. Single-employer trusts remain common for larger employers and where bespoke trust provisions are required.

Practical example

An employer establishes a master trust EGLP with its insurer. On the death of an employee, the trustees (a corporate trustee operated by the insurer) review the deceased’s expression of wish form and pay out the £400,000 lump sum to the employee’s nominated beneficiaries within 30 days — well before probate would have been granted.

References

Trustee Act 2000 — https://www.legislation.gov.uk/ukpga/2000/29
Income Tax (Trading and Other Income) Act 2005, s.480 — https://www.legislation.gov.uk/ukpga/2005/5
Inheritance Tax Act 1984 — https://www.legislation.gov.uk/ukpga/1984/51
HMRC, Inheritance Tax Manual, IHTM17142 — https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual

This entry is part of the Apex Insurance Wiki. Last reviewed by Apex Insurance Brokers on 2026-06-10. Next review: 2026-12-10.

Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.

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