Life Insurance Trust Management
(President, Financial Architects Partners) and Melvin A. Warshaw (General Counsel, Financial Architects Partners) recently published their article entitled Checking Under the Hood, Private Wealth, July 2010. The introduction is below:
Since the collapse of the global markets, wealthy families have been examining their investment portfolios and expecting due diligence and transparency from all of their advisors. But they should also expect no less from those managing their trust-owned life insurance.
Life insurance is no longer a sleepy, static, buy-and-hold asset. The trustee of life insurance held in trust—typically in an irrevocable life insurance trust (ILIT)—must regularly perform due diligence on the policies held in trust, and compare the past and projected performance of existing policies with that of newer products and strategies.
In fact, a trustee should expect to make changes in trust-owned life insurance just as he would expect to make changes when managing a traditional investment portfolio held in trust. A trustee will typically allocate assets and retest and rebalance the model as time goes on as part of the trust’s ongoing management. The same should be true of a large trust-owned (TOLI) life insurance portfolio. Since life insurance often represents a concentrated asset held in trust, and is a complex asset for even professional trustees, the management of trust-owned life insurance presents some unique challenges for most trustees of ILITs.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.