The Biggest Story in Trust Owned Life Insurance (TOLI) in 2016? Trustees Running Away From Their Portfolios-How Can They?

In blogs published throughout 2016, we highlighted the increased challenges for TOLI trustees attempting to manage life insurance policies prudently. Life insurance cost increases more than doubled the carrying costs of many policies, while there were increased fiduciary and regulatory burdens and a multimillion dollar verdict against a major financial institution over a life insurance policy. All this occurred in 2016 and underlined the difficulties and risks associated with managing this asset.

Many banks and trust companies have TOLI portfolios that are filled with “orphan” trusts, with clients that have no other wealth-management relationship with the bank. These portfolios, many obtained through acquisition, often contain much more risk than revenue, and as institutions await a new presidential administration that appears to favor an end to the federal estate tax, some are looking for an exit strategy.

In the past year, we have witnessed and assisted in a number of “bulk transfers” of TOLI portfolios from institutions wishing to exit the business to other firms still committed to servicing this asset. The exiting firm can offload all of the TOLI trusts in their portfolio or just a select group. Generally, in a bulk transfer the selected trusts are moved at once, with one trustee taking control over them from another at a specified date. Obviously, this is not a transaction that will fit with every firm’s business goals, but for those that can take advantage of the transaction, it can be a true win-win scenario.

On Tuesday, December 13, at 2 p.m. Eastern time, ITM TwentyFirst University will feature Leon Wessels, a 15-year veteran of the TOLI industry, who will discuss Knowing Why, When and How to Move ILIT Accounts Out of Your Portfolio. This will be our last session of 2016, and if you are contemplating any changes to your TOLI business in 2017, it will be one you will want to attend. To register, click on the following link: https://www.itm21st.com/Education