Managing trust-owned life insurance policies is a complex task. Trustees often lack the time and resources to gain a deep understanding of life insurance.
While many professional trustees engage third-party providers for regular policy reviews, many rely on minimal actions, such as monitoring financial strength ratings, which may not address the greater sources of trustee liability.
Effective TOLI management involves continuous efforts including:
- Monitoring carriers and staying informed about their financial stability.
- Reviewing in-force illustrations and annual statements and understanding the policy’s status and performance.
- Evaluating policy performance and making sure to compare against established benchmarks for optimal results.
- Taking appropriate actions to ensure the trust’s goals align with the policy’s performance, adjusting as needed.
- Maintaining open communication with grantors and beneficiaries to address concerns and align objectives.
Navigating Complexities
Today’s life insurance policies are more complicated than ever, offering policy owners various options affecting death benefits, premium payments, and risk assumptions. However, trustees must be cautious, as these choices directly impact policy performance.
Grantor-related challenges, such as changing investment yields or changing goals and objectives can further complicate trust management. Trustees may face decisions regarding adjusted premium gifts, changes in estate tax laws, or alterations to the policy’s face value. Understanding available options, leveraging policy provisions, and considering alternatives like life settlements become crucial aspects of managing these challenges.
Read More: 2026 Estate Tax Sunset: Are You Ready?
Managing life insurance policies in trusts demands continuous adaptation to policy changes, shifting grantor dynamics, and evolving market conditions. Active policy management, involved in thorough policy reviews and strategic decision-making, enhances the trust’s long-term success for the benefit of both grantors and beneficiaries.
If managing the five essential aspects of TOLI administration as a trustee proves time-consuming and complex, Life Insurance Trust Company has the tools, resources, and team to help you navigate these complexities.
As successor trustee, LITCO handles the day-to-day trust administration and policy management and provides annual policy reviews, trust management reporting, a designated trust officer and life insurance expert on each account, and policy remediation when necessary. To learn more about our trust-owned life insurance solution, contact us today!
