In our last post, we highlighted the fact there finally is a solution for those TOLI trustees that share a common problem – orphan trusts – life insurance trusts with grantors who have no other business relationship with the bank or trust company. That solution is Life Insurance Trust Company (LITC), an affiliated company started under the ITM TwentyFirst umbrella. Many TOLI trustees have reached out to us in the past year to describe the issues they have with orphan trusts, namely, they represent mostly liability and little revenue. Most TOLI trustees do not have the economy of scale needed to manage life insurance trusts profitably without additional revenue from the TOLI client and housing orphan trusts simply makes no business sense. Even those trustees with TOLI clients with other revenue generating assets have contacted LITC to see if moving their ILITs makes sense and it can. LITC is a specialty asset company and can lift those ILITs out without tampering with the other more lucrative opportunities the bank or trust company has with that client.
But how does LITC do that?
The 5-step process is rather simple.
- NDA: As with most business transactions the first step starts with a Mutual Non-Disclosure Agreement (NDA) which allows LITC to access the trust information.
- INITIAL REVIEW: Working with LITC staff, you will review all your TOLI accounts to determine which accounts will be transferred or if all accounts will be transferred.
- AGREEMENT/DUE DILIGENCE: After the identification of accounts, LITC will send an agreement that outlines the terms of the transfer. Simultaneously, the staff at LITC will conduct due diligence on the trust documents and the assets in the trust – the policies themselves. This will take about 1 week for every 25 trusts that are transferring. With larger portfolios, this process can be sped up.
- COURT PETITIONS: Once an agreement is in place, LITC legal counsel will file a petition in South Dakota to alert the court of the intent to change trusteeship and ask that they approve the governing documents. While this occurs, LITC will work with you to develop correspondence for all grantors and beneficiaries alerting them to the change. Once the first petition is approved, the notice, a copy of the petition, and a recent trust inventory statement will be sent to all interested parties (grantors and beneficiaries). Once this occurs, a second petition is filed with the court to approve the acquisition agreement and transfer trusteeship. Once signed, LITC becomes trustee. This entire process will be handled by LITCO with input, but minimal effort, from you.
- ONBOARDING: Once LITC becomes trustee, an onboarding process occurs. LITC will provide you with a checklist to facilitate the process and helped by our back-office support partners, will make the process as seamless as possible. The onboarding process takes about a month to complete.
The whole process, start to finish, can be completed in as little as a few weeks to a couple of months, depending on the size of the TOLI portfolio.
We have successfully onboarded our first clients in the new trust company and a future blog entry will contain a case study of the process.
For information about how you can get started today, please contact Leon Wessels at 605.574.1703 or firstname.lastname@example.org.