Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, July 18, 2013

Advice for Trustees of Trusts Owning Life Insurance


Trustees of trusts owning life insurance should prepare for a bumpy road ahead with interest rates on the rise.  Because a significant amount of life insurance is held in trusts, beneficiaries are inclined to question how trustees handle their fiduciary duties.  Also, most trustees of trusts owning life insurance are not experts in both trust matters and life insurance matters.  To help protect themselves, trustees of trusts owning life insurance should do the following:

  1. Ensure there is enough professional liability insurance to cover the death benefit amount.
  2. Instead of allowing insurance representatives to “audit” the policy, hire a professional fee-only advisor with no financial stake to review the policy.
  3. Keep good records of all decisions.
  4. Prove due diligence by researching how trust policies operate. 

See Robert Hayden, TOLI Trouble, Wealth Management, July 10, 2013. 


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I strongly object to your advice about not using a life insurance professional to "audit" an existing life insurance policy. A fee-only advisor has a "financial stake" in his work - his or her fee! A true life insurance professional (I have been a CLU for over 35 years) can objectively review an existing policy and, indeed, has an obligation to his clients to do so given the everchanging interest rate and investment environment. Changes in tax law and client objectives and circumstances are key parts of any policy analysis. I may or may not receive any compensation for my review of existing or new client policies. I will, however, provide objective, professional advice to the client that is strictly in the client's best interest. To do otherwise is unacceptable.

Posted by: JOHN K. HEUISLER | Jul 19, 2013 8:59:30 AM

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