How can a professional advisor demonstrate the life insurance expertise expected by grantors, beneficiaries, and family members serving as unskilled personal trustees? An insurance trust is created to achieve measurable asset preservation, liquidity timing, cash flow and tax leverage, and income planning objectives. These criteria combine to form the basis of an economic analysis that identifies the expected trust return (death benefit proceeds) and premium payment risk (100% premium adequacy to sustain the policy for the insured’s lifetime).

When a corporate trustee is engaged, a professional advisor plays a key role in confirming trust objectives and trust management expectations. When a family member serves as personal trustee, he/she and the grantor usually rely upon a professional advisor to coordinate policy selection and trust operation. To avoid breach of fiduciary duty liability, a professional advisor should confirm:

• Product suitability based on the trust’s objectives and gifting plan,
• Premium adequacy based on policy guarantees or actuarially certified evaluation, and
• Periodic performance of policy acceptance benchmark values.

Subsequently, if the trust objectives change or the policy is under-performing its acceptance benchmark values or is no longer needed, the advisor should verify the trustee’s studied consideration of restructure options.

TAC assists professional advisors in coordinating and confirming ‘best practices’ TOLI policy risk management.