WSJ Article on Recent Court Case Highlights a TOLI Trustee Problem

A recent Wall Street Journal (WSJ) article (1) highlighted a problem we reported back in 2013 in a blog post entitled, So…What Happens at Age 100. The WSJ article tells the story of a Florida resident turning 100 years old who has an irrevocable life insurance trust (ILIT) that holds $3.2 million in death benefit. Because of contract language in his universal life policies, the trust will not receive the death benefit at age 100 when the policy matures, but only the cash value in the policy – a much lower amount. While the article states this is a “standard feature of permanent life insurance,” the insured/grantor and trustee are suing the carrier, Transamerica.

Now Is the Time to Consider Outsourcing Your Irrevocable Life Insurance Trust Administration – Second of a Three Part Series

In our last entry, the first of this three part series, we outlined the TOLI outsourcing model, starting with onboarding the trust and policy, through the full administration process and touching on remediation. In this entry, we will discuss the advantages of outsourcing for the TOLI trustee.

Class Action Lawsuit Filed Against Lincoln National For COI Increases In Jefferson Pilot Policies

A class action lawsuit was filed last week in the Eastern District of Pennsylvania against Lincoln National Life Insurance Company on behalf of the owners of Jefferson Pilot-issued, JP Legend 100, 200, 300 and 400 series life insurance policies.   Lincoln National purchased Jefferson Pilot in March of 2006.

A Possible Tax Law Change in 2017 May Lead to Another Use for ILITs

Earlier this year, the Senate Committee on Finance voted to kill a strategy used to greatly enhance the value of an Individual Retirement Account (IRA). Permitted since 1987, the so-called “Stretch IRA” plan allows an IRA beneficiary to take distributions from an inherited IRA out over his or her lifetime, allowing the IRA account to grow tax-deferred and stretching the tax bill over many years. Many IRA owners have named children and even grandchildren as beneficiaries, making the strategy a useful tool to leverage assets to later generations.

John Hancock Hit With Class Action Lawsuit Over Cost of Insurance In Some Universal Life Policies

A class action lawsuit filed in the United States District Court in New York, alleges that John Hancock Life Insurance Company (U.S.A.) has forced policyholders to pay “unlawful and excessive cost of insurance (“COI”) charges,” as well as “unlawful and excessive premiums.”

Transamerica Now Making It Almost Impossible to Manage Their Life Insurance Policies

Managing life insurance is not an easy job in this historically low interest rate environment, especially with the unprecedented cost of insurance (COI) increases we have seen in the last few months. In one of our recent blogs, we highlighted one Transamerica policy our Remediation Department has dealt with. That policy’s premium jumped from $36,400 to $81,595 overnight. Hard to deal with policies like that…and hard to manage.

Ten Mistakes (We See) Many TOLI Trustees Make

At Insurance Trust Monitor, we have seen pretty much everything there is to see when it comes to life insurance management, yet monthly, sometimes weekly, we come across something we have not seen before. I understand that life insurance is a confusing asset to manage, and when you add in the tax and estate planning requirements around trust administration, I totally get it that trustees have a tough job. In our contacts with prospects and clients, we have found ten areas where we see the most problems when it comes to TOLI.  This list is generated from being in the place where we at ITM live: the trenches of TOLI trust/policy management.

Max-Hervé George versus Aviva, a Quick Update

Recently, ITM posted a blog entitled, The Best Life Insurance Policy Ever . . . Unless Your Name is Aviva, which recounted the good fortune of Max-Hervé George, whose father had purchased a life insurance policy for him when he was a child. The policy guidelines effectively enabled a policy owner to manage the cash value in the policy by essentially backdating his investment decisions. The “crystal ball” policy was issued two decades ago by a company now owned by Aviva. Unfortunately, for Aviva, some believe that the policy’s value could surpass a billion dollars by 2020. From 1997 to 2007, the policy had a projected annual rate of return of 68 percent. If this is an indication of future returns, the Rule of 72 tells us the policy value will double again in just over a year.  And on and on……

Rafert v. Meyer… Required Reading for a TOLI Trustee

It is not often that you run across a Trust Owned Life Insurance (TOLI) case in the courts.  Most disputes around life insurance trusts are settled on the down-low, with a check changing hands and little publicity.  That is the point.  We do have the Cochran case, which provided those of us who manage these assets with some guidance, but most admit the court set the bar pretty low in that instance.  Now, we have Rafert v. Meyer, a case whose lower court decision seems to set the bar so low it would be hard for a trustee to squeeze under it.

I Guess If You Are Going to Hand Money Out, Some People Will Take It...(Allegedly)

Another interesting lawsuit was filed in California, home of many interesting life insurance-related lawsuits. Transamerica Life Insurance Company filed a lawsuit this month against various California life insurance agents and their firms. In the suit, the carrier alleged that the agents sold Indexed Universal Life (IUL) policies to individuals “who did not need or want the insurance and/or could not afford the insurance, and who had no intent of ever paying premiums for the policies, including both initially and to keep the insurance in effect after one year.”