Best Interest Standards for Life Insurance Would Be a TOLI Trustee’s Best Friend

As a TOLI trustee, you have a fiduciary responsibility to ensure that every transaction - either a new policy sale or replacement is not only suitable for your client, but also in your client’s best interest.

Informing Grantors About Their Policy Makes Good Business Sense

An online survey about life insurance found that 33% of life insurance policy owners do not understand how their policy works. (1) I suspect that this number is probably low. Perhaps the other 67% think they know how it works, but I imagine they could get a refresher lesson. Even if a policy owner does understand how it works, do they understand how a decade [...]

2021-04-23T16:26:36-05:00April 23rd, 2021|General Interest, Policy Management|0 Comments

TOLI Trustee Alert: The Taxation of a Life Settlement Policy Sale

In our last two blogs, we discussed when and how to sell a life insurance policy.  In this blog entry, we want to talk about the taxation of a life insurance policy sale for the seller. The death benefit of a life insurance held in trust is received free of both estate and income taxes, however, if a TOLI life insurance policy is sold, [...]

The TOLI Handbook – Chapter 15: Understanding Life Expectancy Reports

We recently wrote about remediation and the challenges that TOLI trustees have when managing a policy.  Remediation is not just developing the best options for an under performing policy, increasingly it means maximizing the value of a policy that a grantor believes is no longer needed, or one whose expected funding has stopped. These decisions must be well-thought-out and every data point that can be [...]

Remediation, the Weak Link for Trustees – The TOLI Handbook: Chapter 16

A TOLI trustee we work with received a request from a grantor tired of gifting to pay premiums on his portfolio of whole life policies. His agent suggested that the three policies be replaced with one policy with a reduced death benefit. The existing portfolio totaled $5.7 million of coverage.  The agent proposed transferring the $2.1 million of cash value into a $3 million equity [...]

TOLI Trustee Work Load and Liability Climbing as Use of ILITs Diminish

As the federal estate tax laws changed, the use of new irrevocable life insurance trusts (ILITs) diminished, but the work required to administer existing ILITs went up along with the potential liability attached to the asset class.  There are several reasons for this. 1. As a country, we are aging and the population of the average TOLI portfolio is aging too. For example, 25% of [...]

Carrier Offers Life Policy Buyback – Another Trustee Decision Dilemma

A couple of years ago, Lincoln National was offering some policy holders the opportunity to receive an “Enhanced Cash Surrender Value” if they surrendered their life insurance policies within a specific time frame.  A few weeks before this was widely known, we began to receive letters from the carrier, along with a Frequently Asked Questions (FAQ) brochure explaining the offer.The offer is not unlike offers [...]

3 Trends in Corporate ILIT Administration That You Should Be Aware Of

There are three continuing trends with respect to TOLI management in the corporate fiduciary space.  If you find yourself managing or overseeing TOLI at a bank or trust company, I’m sure you are seeing some of this play out in your own department. TREND #1 Overdependence on Support Software If used correctly, ILIT support software is great for minimizing potential administrative miscues.  Many of [...]

TOLI Trustee Alert: Managing Variable Universal Life Policies Comes with Specific Challenges

Variable universal life (VUL) policies, whose sales took a nosedive after the 2007-09 market crash, have had a resurgence. In 2018 sales jumped, with annualized premiums from new VUL sales increasing by 14% over the prior year. (1) VUL policies provide the policy owner with the opportunity to invest in the equity market. The cash value in the policy is held in separate accounts and [...]

TOLI Trustee Alert: Oops, the Policy Lapsed…Now What?

The most common fear for a life insurance trustee is that somehow the ball is dropped and the policy in their care lapses. After all, a trust-owned life insurance (TOLI) trustee, even if they are not sophisticated in all the nuances of life insurance policy management, should at least be able to keep the policy in force. But unintended lapses do happen, and when they [...]

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