TOLI Presentations ReCap

John Hancock Advanced Markets Radio:

Life Insurance and Prudence: Duties of a Trustee

 with Barry D. Flagg, CFP, CLU, ChFC and Patti Spencer, JD

 Trust-owned life insurance (TOLI) often is the cornerstone of an estate plan and a critical fiduciary responsibility of the trustee.  And, too often financial institutions face substantial risk because Irrevocable Life Insurance Trust (ILIT) trustees have not had guidance for how the Courts will apply the Prudent Investor Act to TOLI.  Now that we have new case law, you will be provided with guidelines to effectively manage TOLI, better serve ILIT clients (while potentially creating new fees/revenues) and protect your financial institution from potential problems down the road.

Barry, Patti and Randy discuss the Uniform Prudent Investor Act and its application in the first court ruling addressing a trustee's activities with regard to the insurance policies owned by the trust. The Cochran case illustrates that Trustee activities will define what a prudent process is--- a process that now clearly includes a duty to actively monitor, investigate and manage ALL trust assets, including life insurance.

Randy Zipse, JD, CPA and VP of The Advanced Markets Group discusses the topic with Barry D. Flagg, CFP, CLU, ChFC, founder of TheInsuranceAdvisor.com (TIA), and Patti S. Spencer, JD, a nationally recognized Trust & Estates attorney, expert witness, and author.

Listen to Part 1

Listen to Part 2 

Trust-Owned Life Insurance (TOLI)
By: Rania Sarkis and Barry D. Flagg, CFP, CLU, ChFC

Trust-owned life insurance (TOLI) often is the cornerstone of an estate plan and a critical fiduciary responsibility of the trustee.  And, too often financial institutions face substantial risk because Irrevocable Life Insurance Trust (ILIT) trustees have not had guidance for how to the Courts will apply the Prudent Investor Act to TOLI.  Now that we have new case law, you will be provided with guidelines to effectively manage TOLI, better serve ILIT clients (while potentially creating new fees/revenues) and protect your financial institution from potential problems down the road. 

This 40-minute telephone briefing will examine the first court decision associated with TOLI.  Lessons learned; best practices; and regulatory expectations will be discussed.  You will be provided critical and practical guidance for complying with regulatory expectations and guidance on assisting management with identifying new business opportunities. In addition, other sources of guidance such as Sections 2 and 7 of the Uniform Prudent Investors Act (UPIA) and Financial Institutions Regulatory Authority (FINRA) Rule IM-2210 will also be reviewed. Additionally, the panel will cover CIP, customer due diligence and enhanced due diligence as well as ongoing monitoring and training issues.

Click Here to listen.

ABA Tele-Briefing Summary

The presenters were THEInsuranceAdvisor.COM founder, Barry D. Flagg, and X-Ray Your Life Insurance Services President, Steven S. Zeiger, were asked to voice their expert opinions as part of an ABA Tele-Briefing on New Case Law for Trust-Owned Life Insurance: What Every Trustee Should Know about Managing TOLI (But Has Been Afraid to Ask).

In Re: Cochran. , 901 NE 2d 1128 (Ind. App. 2009) provides clear guidance that ILIT trustees do not need to be concerned about being second-guessed in hindsight provided they have and follow a "prudent process" and particularly when such a process incorporates information from an "outside, independent entity with no policy to sell or any other financial stake in the outcome." The case also raised but did not resolve the duties to "incur only those costs reasonable and appropriate for the purposes of the trust" and have an "overall investment strategy having risk and return objectives reasonably suited to the trust" and a corresponding "expected total return from income and the appreciation of capital." The court here in Cochran "recognize[d] that this process was certainly less than perfect", the prudent trustee will certainly want to follow the clear guidance for a prudent process that incorporates independent research, and may also wish to consider justifying TOLI expenses and setting reasonable expectations as to the rate of return on invested assets underlying TOLI cash values.

Click Here to view presentation handouts.

To listen to an audio presentation of this tele-briefing, click here.

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