What A Pack of Gum Has In Common With ILITs

I just returned from the Heckerling Institute of Estate Planning.  While passing though the Orlando International Airport (MCO) I stopped to get a pack of gum.  I was surprised to find that they do not sell gum at that airport.  It seems that it generates a maintenance issue they would rather not have.

It makes sense.  The profit that the airport gets from selling gum is much less than the maintenance costs generated by those who purchase the gum.

This got me thinking about ILITs.  A few years ago one of my business partners did an informal review of fee structures at banks and trust companies across the country.  Since then we have been informally gathering information about ILIT pricing from clients and prospects.

Some trustees charge as little as $250 per trust for an ILIT.  The majority seem to be charging between $750-$1,250; with only a few above $1,500 and even fewer at $2,000 or above.  And these are published fees. How much actually being collected is anyone’s guess, but it appears to be considerably less.

To actively manage an ILIT you need more than just an Excel spreadsheet and an administrator.   To manage an ILIT effectively you need specialized administrators with a true system in place.  And you better have insurance experts who understand the intricacies of life insurance and can analyze and simply explain policy options.   An attorney focused solely on trust issues is a plus and can alleviate many problems.  All must be focused and working toward the same goals…maximizing beneficiary value and mitigating liability by documenting a prudent process.

Are those who are not pricing their ILIT fees “correctly” skimping on services?  Do they have a “prudent process” in place?  Is there a system that documents all of the steps in the ILIT administration process?  Do they have true insurance experts managing the policies?  Is an attorney reading all trust documents?  I hope so.

I am not sure what the cost of gum removal is at the Orlando International Airport, but I do know that the potential liability of skimping on ILIT management could easily run into the hundreds of thousands, even millions of dollars.

If you are in the ILIT business, be in the business.  Price your ILITs so you can provide all of the services needed.  If not, you may wish to stop “selling” ILITs.