The previous two pieces in this series established the UK tax baseline for life insurance payouts and the mechanics of trust structures that remove a policy from the policyholder’s estate for Inheritance Tax purposes. This third piece addresses a question that arises directly from that analysis: when the life company itself authors the trust structure — as is standard practice across the offshore PPLI market — does that structure hold, and what are the UK IHT implications across the major PPLI jurisdictions beyond the Crown dependencies?

THIS SERIES
Part 1 – Are Life Insurance Payouts Tax-Free in the UK?
Part 2 – Writing Life Insurance in Trust: How the Structure Works and What Changed in April 2025
Part 3 – Offshore PPLI and the Trust Question (You are here)

THE LIFE COMPANY TRUST MODEL: HOW IT WORKS

Most offshore PPLI carriers offer their own standard trust documentation as part of the policy structuring process. The life company establishes a trust deed — drafted under the law of its home jurisdiction — appointing either itself, an associated trustee entity, or a third-party professional trustee as trustee. The policyholder settles the policy into this trust at inception, becoming the settlor. Named beneficiaries receive the death benefit through the trust structure, bypassing the policyholder’s estate entirely.

This structure achieves the same legal result as any properly drafted UK trust: legal ownership of the policy vests in the trustee, the policy is excluded from the settlor’s estate for IHT purposes, and the probate requirement is bypassed on death. For a full explanation of how these mechanics work, see Part 2 of this series.

The key principle is that the IHT analysis turns on the trust structure — not on the jurisdiction in which the life company or trust is based. For UK-domiciled policyholders subject to UK IHT on worldwide assets, an offshore trust holding an offshore life policy is assessed by UK IHT rules in exactly the same way as a UK trust holding a UK policy. The offshore nature of the structure is not, in itself, an IHT-mitigation tool for UK-domiciled settlors.

What the jurisdiction matters for is the regulatory framework protecting the policy itself — a separate question, but an equally important one, covered across this site’s jurisdiction profiles.

THE POST-APRIL 2025 FRAMEWORK: A REMINDER

From 6 April 2025, UK IHT liability turns on long-term UK residence rather than domicile. An individual resident in the UK for 10 of the last 20 tax years is a “long-term UK resident” and is subject to UK IHT on worldwide assets, including non-UK assets held in offshore structures. For those individuals, an offshore PPLI trust structure offers IHT protection through the trust mechanism on death — but not through the offshore location of the trust, which no longer confers excluded property status.

For non-UK long-term residents — clients who have genuinely not met the 10-of-20 test — the analysis differs, and offshore excluded property structures retain relevance. Advisers should verify each client’s position under the new residence test before drawing conclusions from pre-April 2025 planning.

JURISDICTION BY JURISDICTION

Luxembourg

Luxembourg is the dominant European PPLI jurisdiction, with approximately €5.5 trillion in regulated assets and a policyholder protection mechanism — the “Triangle of Security” — that segregates policy assets with a custodian bank under CAA supervision. Luxembourg PPLI carriers offer their own discretionary and absolute trust frameworks, typically structured under Luxembourg law.

IHT POINT
For UK policyholders, Luxembourg trust structures function identically to any other trust for UK IHT purposes: the policy held in trust is outside the estate on death, provided the settlor is genuinely excluded from the beneficial class and the Gift with Reservation of Benefit rules are not engaged. The regulatory question — whether the Triangle of Security protection held under the pressure of the FWU liquidation — is analysed in our Luxembourg piece. Advisers should not conflate the IHT effectiveness of the trust structure with the security of the underlying policy assets.

Ireland

Ireland is a Solvency II-compliant EU jurisdiction and a significant post-Brexit insurance hub. Its major PPLI carriers offer trust facilities to policyholders, typically drafted under Irish law and governed by the Trustee Act 1893 (as amended) and related legislation. Ireland’s lower cost base relative to Luxembourg has made it an attractive alternative for carriers seeking EU market access.

IHT POINT
No structural IHT advantage over a UK trust for UK-domiciled policyholders. The policy must be written in trust at inception, with no retained benefit. Ireland’s Insurance Compensation Fund explicitly does not cover life insurance products — a risk relevant to policy security, not IHT treatment, but material nonetheless. See our Ireland risk profile.

Switzerland and Liechtenstein

Swiss PPLI carriers — historically led by Swiss Life, Zurich, and a number of boutique providers — offer some of the most sophisticated trust and foundation structures in the PPLI market. Liechtenstein in particular has its own statutory foundation structure (the Stiftung), which operates with similarities to an Anglo-Saxon trust but under Liechtenstein private law.

For UK IHT purposes, both Swiss trusts and Liechtenstein foundations are assessed under UK rules as foreign-law trusts. Post-April 2025, a long-term UK resident settlor with a Swiss or Liechtenstein PPLI in trust has no excluded property shield on those assets — the policy is within scope of UK IHT on worldwide assets.

IHT POINT
The trust or foundation structure removes the policy from the estate on death — that protection holds regardless of jurisdiction. But the broader excluded property benefit that some non-dom clients previously enjoyed through Swiss or Liechtenstein structures is no longer available to long-term UK residents following the April 2025 changes. Advisers should review existing structures urgently. The Swiss Life USD 1.45 billion DOJ prosecution for tax evasion facilitation — examined in our Switzerland and Liechtenstein piece — is a separate matter, but a reminder that compliance risk and IHT planning risk are distinct and both require active management.

Singapore

Singapore’s PPLI market is regulated by the Monetary Authority of Singapore (MAS) and has grown significantly as a structuring hub for Southeast Asian UHNWI clients. PPLI carriers operating there issue policies held under Singapore-law trusts, typically administered by licensed trust companies regulated by MAS. Singapore has not experienced a major PPLI-specific insurer failure, and the MAS is broadly regarded as one of the most effective regulators in the Asian market.

IHT POINT
A Singapore-law trust holding a Singapore-domiciled PPLI policy is a non-UK situs asset held in an offshore trust. Post-April 2025, if the settlor is a long-term UK resident, the policy and the trust fall within the scope of UK IHT on worldwide assets. The trust structure removes the asset from the estate on death — but periodic charges under the relevant property regime may apply to the trust for long-term UK residents. For non-long-term residents, Singapore-domiciled non-UK assets may retain excluded property status. See our broader Asian PPLI hubs analysis for the full regulatory context.

Mauritius

Mauritius has developed a purpose-built statutory framework for PPLI through its 2022 Structured Investment-Linked Insurance Business (SILIB) rules — the first jurisdiction-specific, dedicated PPLI framework enacted by any financial centre since Luxembourg’s Triangle of Security. PPLI structures are typically held under Mauritius-law trusts, administered by licensed management companies regulated by the Financial Services Commission (FSC). The jurisdiction’s double tax treaty network has made it attractive for clients with emerging market exposures.

IHT POINT
The jurisdictional trust framework is sound. For UK policyholders, the IHT benefit for long-term UK residents comes from the trust mechanism — not the Mauritius location. The Mauritius double tax treaty network may offer advantages in income and gains treatment that are separate from the IHT analysis. The FSC’s enforcement record, including the Privy Council validation of its regulatory authority in Rainbow Insurance v FSC [2015] UKPC 15, provides institutional credibility that several competing jurisdictions cannot match. Full analysis in our Mauritius benchmark piece.

Malta

Malta offers EU membership, Solvency II compliance, and lower operational costs than Luxembourg or Ireland, making it an accessible EU insurance domicile for carriers serving European PPLI clients. Trust structures under Maltese law are available, though Malta’s trust law is a more recent development than those of the common-law offshore jurisdictions.

IHT POINT
Maltese trusts function in the same way as other offshore trusts for UK IHT purposes: estate exclusion on death, subject to GROB rules and the April 2025 residence-based test. The MFSA’s broader regulatory record — examined in our Malta risk profile — suggests that lower cost comes with commensurate regulatory intensity. Advisers should weigh this in selecting carriers.

THE CROWN DEPENDENCIES: A NOTE

This analysis focuses deliberately beyond the Crown dependencies, which are covered extensively elsewhere. But two points are worth noting for context:

The Guernsey framework mandates that an independent trustee holds at least 90% of assets representing policyholder liabilities — a structural protection not replicated in most other jurisdictions. Its trust law is mature and well-tested. The IHT analysis for UK policyholders is the same as for any other offshore trust jurisdiction.

The Isle of Man‘s regulatory record on PPLI-adjacent products is more complicated — the systemic mis-selling of retail portfolio bonds to investors across Asia, the Middle East, and Latin America raises questions about the robustness of conduct supervision that are separate from the IHT analysis but material to carrier selection.

WHAT ADVISERS SHOULD BE CHECKING

Regardless of jurisdiction, the following questions apply to any offshore PPLI trust structure for a UK-connected policyholder:

• Is the trust properly constituted? The trust deed must have been properly executed under its governing law. Defective documentation is a recurring failure point — as illustrated by the Lombard International unsigned policy scandal in Luxembourg.
• Is the settlor excluded from the beneficial class? Inclusion — even as a discretionary beneficiary — may trigger Gift with Reservation of Benefit rules and bring the policy back into the estate.
• Has the April 2025 long-term residence test been assessed? The change from domicile to residence changes the analysis for many clients who previously relied on non-dom status.
• What is the deemed value of the policy at settlement? For whole-of-life and investment-linked policies transferred into discretionary trust, the CLT value at transfer and the 10-year charge calculation require attention.
• Is the trust registered where required? The UK Trust Registration Service requires most express trusts with a UK connection to register. Offshore trusts with UK-resident trustees, UK-resident beneficiaries, or UK-situs assets may be within scope.
• Is the GROB position reviewed periodically? Circumstances change. A settlor who later becomes entitled to a benefit from the trust — including indirectly — can inadvertently re-engage the GROB rules.
• Is the trustee genuinely independent? Where the life company itself or a wholly-owned subsidiary acts as trustee, the independence of the trustee function deserves scrutiny.

THE STRUCTURAL CONCLUSION

The offshore life company trust model — where the carrier provides its own trust documentation and the policy is settled into that trust at inception — is a legitimate and effective estate planning structure for UK policyholders. The IHT protection it provides derives from the trust structure, not from the offshore location of the carrier or the trust.

For UK-domiciled long-term residents, the April 2025 changes have not removed this protection — a policy in trust is still outside the estate on death. What has changed is the excluded property status for non-UK assets held in offshore trusts by long-term residents, and the availability of protected settlement status for income and gains purposes. Existing structures established under pre-2025 assumptions require review.

The jurisdiction question — which PPLI carrier and which trust framework to use — remains important, but primarily for regulatory and structural reasons rather than IHT-driven ones: the quality of the trust law, the independence of the trustee, the segregation of policy assets, and the track record of the regulator. Those questions are what the broader jurisdiction series on this site is designed to answer. For an overview of how PPLI structures support estate planning and tax optimisation objectives more broadly, see the relevant sections of this site.