Now Is a Good Time for TOLI Trustees to Talk to Their Clients

2019-02-04T15:52:50+00:00

An online survey about life insurance found 33% of life insurance policy owners do not understand how their policy works. (1) The other 67% probably think they know how it does, but I imagine they would appreciate a refresher lesson on how it actually works. Even if they do understand how it works, do they understand how a decade of low interest rates and equity market volatility affected their policy?

TOLI trustees should be reaching out to grantors to explain to them how their policy works. Doing so provides the grantor with greater clarity about their policy and gives you a chance to deepen the client relationship, bringing benefits to both of you.

For the grantor who has dutifully paid premiums (and trust fees) for years, the discussion will reinforce the reasons for taking the policy out. Even though changes in the federal estate tax may have greatly reduced the number of people subjected to the tax, life insurance is still a worthwhile financial investment, and that point can be driven home by the discussion.

Years of low interest rates have been a drag on performance, and now is the time to review those policies with your clients – when interest rates are ticking up and fixed investments (which most life insurance policies are) have a rosier future. Perhaps the premiums will have to be increased to keep the policy on track, but the policy, if managed correctly, is still a valuable asset.

Many grantors are reassessing their financial and estate planning futures, and once comfortable that their life insurance is secure and valuable, you can move on to other subjects that may provide additional revenue for your firm.

For many, retirement income is a major concern. Your financial planning services can lead to additional opportunities for your firm. For example, clients who are worried they may “run out of money” can be introduced to annuities as a funding vehicle for a portion of their assets to ensure a basic lifetime income.

Higher net worth clients, with well-funded retirements, still need your services. Introduce investment options as you develop a relationship with them. These clients also have issues other than money you can solve — most struggle with how much to pass on to their children and how to structure the inheritance. You can bring great relief to ILIT clients by introducing other trust and estate planning services that can solve their problems.

Use these discussions to open a dialogue with the beneficiaries of the ILIT. Most TOLI trustees rank retaining the asset – the death benefit – as one reason for handling ILITs, yet few put in the time and effort to cultivate the next generation of wealth. Why can’t the beneficiaries be clients now so retaining the TOLI benefit in the future will be cemented?

Explaining the policy can be the first step to greater opportunities. Open the lines of communication with your grantors; you will be glad you did.

1. “54% of Americans Own a Life Insurance Policy, but One-Third Are Not Exactly Sure How It Works,” Mike Brown, September 19, 2018 lenedu.com

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