Life insurance policy / Trust / Foundation: the comparative

November 11, 2025

Life insurance contracts, trusts and foundations have completely different uses. They don't have the same legal basis, the foundation has a legal personality while the life insurance contract and the trust do not. All these elements distinguish these asset management tools.

Life insurance contract, trust or foundation: 10-point comparison

Choosing between a life insurance policy, a trust or a foundation is a major financial decision. These three structures offer distinct advantages: a foundation has its own legal personality, unlike a life insurance policy or a trust, which do not. Each solution meets specific objectives in terms of inheritance, protection and tax optimisation. Our detailed comparison will help you identify the structure best suited to your financial situation.

	LIFE INSURANCE POLICY	TRUST	PRIVATE FOUNDATION
DEFINITION	A contract by which the Insurer, in return for the payment of a premium/s, undertakes to pay a capital sum or a specified annuity to the beneficiaries nominated by the subscriber in the event of his death or, if he survives, at a fixed future date	Arrangement by which one or more related persons (e.g. members of the same family) transfer their assets to a person they trust, and he has to manage these assets in accordance with the instructions given to him for the benefit of one or more Beneficiaries	Arrangement for the permanent and irrevocable transfer of assets to a legal entity created for this purpose in order to achieve a specific impartial purpose
LEGAL BASIS	Civil law/Common law	Common law	Civil Law
CREATION	Contract between the subscriber and the insurance company	A unilateral deed by the settlor: the trust deed	Creation of a company by the founder and transfer of the assets to the company
LEGAL PERSONALITY	No	No	Yes
TERM	Fixed term or whole life - Terminated on the survival (at a given age) or the death of the insured, or by the ending of the term, or by total redemption of the policy	Fixed term generally determined to maximum between 80 and 100 years	Unlimited term - Not dissolved on the death of the founder
PARTIES	Subscriber: the person who takes out the policy Insured: the person to whom the insured risk relates and whose death or survival triggers payment under the policy Beneficiary: the person(s) nominated by the subscriber to receive the capital sum at the termination of the policy	Settlor: the person who sets up the trust with all or part of his assets Trustee : the administrator of the trust who has powers of management and allocation over the assets placed in trust Beneficiary(s): the person(s) to whom the trust’s assets, income, etc. reverts	Founder: the person creating the foundation and to which he contributes his assets. Board: management body of the foundation, composed of several members. Beneficiary(s): the person(s) who benefit from the foundation (share of income, share of assets, etc.).
ASSETS	Depending on the Luxembourg Insurance Commission’s circular, LC15/3	All types of asset including life insurance policies*	All types of asset including life insurance policies*
OWNERSHIP OF ASSETS	Insurance company	Trustee (legal ownership) Beneficiary (equitable owner)	Foundation
MANAGEMENT	Management of the policy conducted in accordance with the investment profile of the client by an authorised manager**	Trustee, depending on the terms of the "trust deed"	Board made up of directors with the objective of accomplishing the task assigned to them (= purpose of the foundation)
ADVANTAGES	Transmission of assets to the beneficiary(s) of its choice thanks to the beneficiary clause Estate planning Envelope capitalising to make it profitable and value its capital over time	Wealth Preservation Estate Planning Preservation of Confidentiality Asset Protection	Preservation and management of assets Transferral of assets in strict confidentiality Protection and maintenance of one or more people

*Subject to acceptance by the Insurance Company
**Except country specificities or underlying assets specificities

This table shows the general characteristics of the different "structures". Each country applies its own legal and tax rules to them. It should be noted that certain "structures" may not be recognised in some countries.