Would it surprise you to know that a fraction of Irrevocable Life Insurance Trust (ILIT) will never pay a benefit?
Why? Because in the last two decades the life insurance industry has been dramatically affected by the lowest interest rates in history. The policies are imploding because of those low interest rates. Insurance plans issued years ago when interest rates were higher may no longer be earning the investment returns it needs to pay premiums as drafted. The result – policies under-performing and in some cases – policies lapsing. There could be a lot of lapses in the next few years with worst of them coming from policies that were issued in the 80's and 90's.
Vanguard Financial views this as an obligation to educate and prepare our clients and partners about this pending crisis. Certain studies have shown that more than 25% of nonguaranteed flexible Trust Owned Life Insurance policies will lapse during the insured's lifetime. ("TOLI Risk Management at Litigation Crossroads," Steve Leimberg's Estate Planning Email Newsletter, no 1110, April 12, 2007).
The fact is that in many instances a non-professional trustee – a relative or neighbor – is given the task of acting as trustee. Often the trustee never reviews the policy performance and many times the trustee really has no working knowledge of how to administer the trust. These are real problems that people may be facing.
Vanguard Financial works with ILIT trustees and their advisors to reduce the trustee’s risk of loss while maximizing what the trust can produce for beneficiaries. We have the experience to help trustees meet their fiduciary duties and maximize what the beneficiaries receive.
Please contact us if you would like to have us check on the health of your insurance plan at no additional fee.
This information is for informational purposes only and should not be construed as advice or a solicitation to purchase life insurance.