The single largest personal investment for couples between the ages of thirty and sixty is often their primary residence. The mortgage payment on a $400,000 home is approximately $2,416 a month, the national property tax average rate is 1.19%, and the average homeowner insurance cost is $2,300. This is a substantial investment when you consider the total cost to the homeowner while paying off a 30-year mortgage!
By comparison, your clients between the ages of 60 and 90 who have Irrevocable Life Insurance Trusts (ILITs) will make comparable or even greater investments in their ILIT during the funding period as a part of their estate and succession plans. According to ITM Twentyfirst Services and the data that has been collected over 18 years on 49,000+ trust-owned policies, the average ILIT will SURPASS the typical personal home as the largest single investment to an individual.
Considering the amount of money that individuals invest in ILITs, this is all the more reason for your clients to employ experienced financial experts who will help guide them while also protecting the interests of the trust beneficiaries. Just as your clients put great value and pride into purchasing and protecting their homes, they should also understand the importance of protecting their ILIT investments. As a trusted advisor you are uniquely positioned to inform and counsel your clients about the importance of working with qualified corporate trustees.
There is a solution in the marketplace that offers your clients the opportunity to work with trustees that are uniquely familiar with the complexities of life insurance policies and that solution is Life Insurance Trust Company (LITCO). LITCO focuses exclusively on life insurance trusts and provides fiduciary services to grantors and beneficiaries of ILITs that are more extensive than typical corporate trustee services.
Helping clients select the right trustee is also good for your business for the following reasons:
1. Life Insurance Trust Company (LITCO) monitors premium funding to ensure premiums are paid as scheduled maximizing the probability that death benefits will be paid; thereby creating more assets under management (AUM) for your firm;
2. LITCO also measures internal policy costs and if/when these costs increase unjustifiably, you and your client will be alerted to the possible value of a 1035-exchange or other preferred premium funding options;
3. If/when trust objectives change, LITCO will offer guidance regarding other available premium funding options as well as life settlement opportunities – again creating more AUM for your firm!
1. Your clients are unable to continue paying large annual insurance premiums;
2. Your clients don’t believe they’ll have estate tax liabilities;
3. Or your clients are just becoming forgetful and can’t remember to pay their policy premiums.
Regardless of the reasons your clients might no longer want their trust-owned life policies – they desperately need a professional trustee who will offer expert oversight and management. Like any other investment, the TOLI must be monitored!
When your clients’ family homes are no longer needed, they don’t simply walk away abandoning them – they sell the investment perhaps downsizing to something more manageable so that their home is no longer a burden and they can enjoy their retirement years. By contrast, when it comes to insurance trusts, far too many clients are willing to walk away with little or no consideration for the investment they have made in the trust. Few private trustees understand their fiduciary duty and have legal liability by not properly representing the interests of the trust and its beneficiaries.
The following statistics should cause you to reconsider your approach to ILITs and compel you to speak with your ILIT clients about appointing a qualified trustee who will work to protect them as well as you, their advisor:
• 79% of all insurance trusts are not performing as planned
• 54% of TOLI is projected to lapse prior to maturity
• 32% of GUL benefits have been compromised
• 95% of term TOLI is never converted
• 23% of TOLI will lapse prior to the insured’s death
The linked white paper provides information on the importance of naming experienced and knowledgeable trustees who will have your clients’ and their beneficiaries’ best interests at heart! If you would like to learn more about the advantages of aligning your ILIT clients with Life Insurance Trust Company, please Click Here to register for the August 7th webinar that AgencyONE will be hosting to explain these advantages in greater detail.
Please call AgencyONE’s Marketing Department at 301.803.7500 to discuss any ILIT owned life insurance policies or to discuss a case.