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May 1, 2011 12:00 PM
An Ounce of Prevention
When dealing with trust-owned life insurance, trustees must develop good habits to avoid unfortunate outcomes
A great deal has been written in the last decade about trust-owned life insurance (TOLI) and the responsibilities and obligations of trustees/fiduciaries of irrevocable life insurance trusts (ILITs). Although descriptions of a TOLI “crisis” may be hyperbolic, clearly, trustee responsibilities have grown more complex in recent years with the introduction of new investment standards dictated by various state laws, as well as the needs and demands of ILIT beneficiaries, new provisions in trust documents, the often confusing mechanics of life insurance and the proliferation of new life insurance products.
These dynamics have led some TOLI beneficiaries to bring lawsuits against trustees for infractions such as poor investment management decisions, improper life insurance policy design and failure to maintain or properly manage the TOLI policy. Recent lawsuits have occurred at the intersection of regulatory reforms, unrealized life insurance product performance expectations, improvements in new life product pricing and increased sophistication of TOLI beneficiaries. Further, all of this has occurred when the complexities of the life insurance marketplace have waxed while take-charge servicing of life products from professional advisors has waned. The responsibilities of the ILIT trustee are real and must be done proactively. To prevent unfortunate outcomes, the trustee must be aware of the fundamentals of managing an ILIT.
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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