The Prudent Investor Rule measures trustee prudence in terms of the ‘process’ by which investment decisions are made. It instructs a trustee to design and actively carry out a reasoned investment strategy that will fit within the trust’s unique purposes. Further, TOLI is a concentrated investment that requires TOLI-specific procedures and credible policy evaluation.

Life insurance, a risk transfer mechanism, is ideally suited for trust ownership and management. The economic analysis justifying creation of an insurance trust, prepared by the grantor’s legal and/or tax advisor, identifies expected trust return (death benefit proceeds) and premium payment risk (100% premium adequacy to sustain the policy for the insured’s lifetime). A trustee can accept a guaranteed death benefit policy and transfer all premium adequacy and policy performance risk to the underwriting carrier, or the trustee can retain premium adequacy risk by accepting a non-guaranteed death benefit policy and actively managing policy values. Acceptance of premium adequacy and performance risk implies grantor approval to do so, requisite trustee skill and capabilities to actively manage TOLI, and affirmative trustee election to manage the life insurance investment consistent with its TOLI Investment Policy Statement (TIPS).

Active management requires risk-based procedures and premium adequacy evaluation. Outcome Probability Analysis^sm provides an actuarially certified evaluation of premium adequacy for policy acceptance, management and restructure determinations.

TAC understands the liquidity and wealth preservation planning expectations of grantors, beneficiaries, and professional advisors. As a result, we assist trustees in transitioning to credible risk-based TOLI management and implementing best practice solutions for underperforming, unsuitable, and un-needed TOLI policies.