Insurance Trusts - Are Your Clients in Good Hands?

The single largest personal investment for couples between thirty and sixty years of age is often their personal home. The mortgage payment on a $400,000 home is $2,416 a month, the national property tax rate average is 1.19%, and the average homeowner insurance cost is $2,300. When you look at the total investment over the span of 30 years, it is substantial.

By comparison, our clients who have irrevocable life insurance trusts will make similar or greater investments between ages sixty and ninety as a part of their estate and succession plan. According to ITM Twentyfirst Services and the data collected over 18 years on 49,000+ trust owned policies, the average ILIT will surpass the typical home as the largest investment.

Simply said, your clients need experts who will help them while protecting the interests of those with legal standing, the trust beneficiaries. Just as your clients put great value and pride into purchasing and protecting their home for 30 plus years, they should also understand the importance of protecting their ILIT investment in the same manner. As a trusted advisor you are uniquely positioned to counsel or in the very least inform them of the hazards of not appointing a qualified corporate trustee.

Helping clients select the right trustee is also good for your business in several ways. For instance, a qualified trustee will monitor premium funding to ensure premiums are paid as scheduled maximizing the probability that death benefits are actually paid, creating more AUM for your firm to manage. The trustee should also measure internal policy costs, and if/when costs are higher than can be justified, the trustee should alert you to the possibility of a 1035-exchange to lower costs or other premium funding options. Lastly, if/when trust objectives change, the trustee should immediately alert you to other premium funding options as well as life settlement opportunities, again creating more AUM for your firm

Whether your clients become old and forgetful, can’t afford to continue paying large annual premiums, or if they don’t believe they’ll have estate tax liabilities, their insurance trust desperately needs a qualified trustee for expert oversight and management.

When the family home is no longer needed, they don’t simply walk away, they sell it and downsize to something more conducive in their retirement years. Yet when it comes to insurance trusts, far too many clients are willing to walk away with little or no consideration for the investment they have made, few trustees understand their fiduciary duty and expose themselves by not properly representing the interests of the trust beneficiaries.

Consider the following statistics and make a commitment to talk to your ILIT clients about appointing a qualified trustee to protect them as well as yourself. Click here for a white paper on naming trustees.