Exchange of life insurance policies not imprudent

The Indiana intermediate appellate court upheld as prudent a trustee’s decision to exchange variable universal life (VUL) insurance policies on the life of the settlor for a standard whole life policy with a death benefit less than one-third that of the VUL policies.

The VUL policies were losing money because of declines in the stock market and maintaining them would require additional contributions to the trust which were beyond the financial capacity of the insured. The opinion contains an extensive review of the application of the Prudent Investor Act.

In re Stuart Cochran Irrevocable Trust, 901 N.E.2d 1128 (Ind. Ct. App. 2009).