Irrevocable Life Insurance Trusts: Take control

by Oct 8, 2016

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The utilization of an Irrevocable Life Insurance trust continues to be the most basic tool when it comes to sheltering death benefits from taxes and to leveraging the dollar against the confiscation of taxes on estates, both at the federal and state levels.

With Hillary Clinton discussing a reduction in the Federal Lifetime exemption from the current $5.45 million to $3.5 million, and an increase in the maximum tax rate to 65%, the ILIT will become an even more appropriate tool in estate tax planning.

But using an ILIT requires using a Trustee. Being a trustee used to be easy but has become more complicated. The prolonged, low-interest rate environment that we live in has made the duties of the trustee more demanding than simply sending out Crummey Notices.

In just the last month, a number of the polices we agents service received a notice of change in the mortality rates on policies dating back the 1990’s. We expected that the continual increase in life expectancy would pay dividends. I guess not.

Additionally we were recently notified that an insurance company discontinued paying dividends on policies issued back in 1980. Another event unheard of and beyond our imaginations.

Selecting a Trustee has become a more important decision with the responsibilities going way beyond issuing annual Crummey Notices. Here is a short list of the critical duties:

  • Determine when coverage is going to run out, including permanent policies
  • Measure the performance of the policies versus the original plan assumptions
  • Check the financials of the company. This low interest rate environment has left many companies in distress
  • Check to determine if the Trustee is still the best choice, with particular attention to skills in the event the trust is ever funded

Being a Trustee has become a big job, let’s be certain the appointed one has the skills necessary to do it.

If you have questions email Kyle at or call 203.698.9342.

Written by: Steve Shepard

Founder/Principal, Shepard Insurance Group. At Shepard Insurance Group we begin every relationship with a face to face meeting with the client. In a comprehensive discussion of coverage needs, personal concerns, objectives and finally appetite for risk, we can arrive at the proper insurance solution. Understanding the client is the first step to accurate execution.

October 8, 2016

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