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Every TOLI Trustee Should Know the Answers to These Questions


Question 1

What should you do if a premium is due on a guaranteed universal life (GUL) policy and you have not received all the signed Crummey Notices from the beneficiaries?

Answer: Because death benefit guarantees can be compromised in a GUL policy if the premium is not paid in full and on time, the premium should be sent.  See the Closer Look chapters, for more information on policy characteristics and the Guaranteed Universal life – a Closer Look chapter specifically.


Question 2

What is one of the biggest mistake trustees make with term life insurance and how can they be held liable for thousands of dollars in additional premium costs because of it?

Answer: Allowing the conversion option on a term policy to lapse can create a significant liability for a Trustee.  See the introduction story and Chapter 4 – An Introduction to Life Insurance for more information on the conversion option.


Question 3

What has happened to dividends in whole life insurance policies over the last two decades and how has it affected policy performance?

Answer: Dividends have generally dropped over the last 3 decades and policy performance has suffered, well below what was projected in most sales illustrations.  See Chapter 5 – Whole Life Insurance – A Closer Look, for more information.


Question 4

Why have carrying costs on some current assumption life insurance policies doubled and tripled overnight and can a TOLI trustee be held liable for the increases?

Answer: There are a number of reasons for the cost of insurance (COI) increases we have experienced, chief among them a decade of low interest rates.  For a complete run down of all factors, see Chapter 11 - Why Did The Cost of Insurance Increase in My Policy?


Question 5

When should a TOLI trustee consider selling a life insurance policy and how does not considering the option raise liability?

Answer: Any time a policy is going to be surrendered or allowed to lapse, the sale of the policy in the secondary should be reviewed and considered.  While the decision to sell a policy will depend on many factors, if a sale is not reviewed a beneficiary could argue the Trustee did not perform their fiduciary duty to maximize the value of the policy in the trust.  See Chapter 14 - Understanding Life Settlements, for more information.


Question 6

What is more important when a trustee makes a decision about a policy, the outcome or the process?

Answer: The process is more important.  As trustee you cannot always control the outcome, but you can control the process.  See Chapter 17 - Closing Thoughts, for a discussion of the topic.


The TOLI Handbook was developed to provide trust owned life insurance (TOLI) Trustees and all Professionals dealing with life insurance, especially Fiduciaries, the information they need to successfully manage this cumbersome asset.



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