Not only is sharing policy info with grantors useful, it might be necessary. An online survey found that 33% of life insurance policy owners do not understand how their policy works. (1) This number is quite low, and indicates that they need someone to inform them of the details. Even if a policy owner understands how it works, they may not be aware of how a decade of low interest rates have affected its value.
TOLI trustees need to contact their grantors to explain in detail how their policy works. This will provide the grantor with greater clarity about their policy, and will provide the trustee with a chance to deepen the clientele relationship.
Policy Fluctuation and Reassessment
For the grantor who has been dutifully paying premiums and trust fees for years, the discussion will reinforce the reasons for taking the policy out. While the changes in the federal estate tax may have greatly reduced the number of people subject to the tax, life insurance is still a worthwhile financial investment. Even if the proceeds are not the equivalent of their taxation value, this does not mean the proceeds are no longer as valuable. Actually, for many clients, 100% of the benefit will go to the beneficiaries.
For some policies, the last ten years of low-interest rates have brought down performance. Now is the time to review those policies with your clients – when interest rates are ticking up and fixed investments have a rosier future. Premiums may have to be increased to keep the policy on track. Yet the policy, if managed correctly, is still a valuable asset.
Many of your grantors are reassessing their financial and estate planning future, given the changes and market volatility of the last ten years. Once they are comfortable, and their life insurance policy is secure and valuable, you can move on to other subjects that may provide additional revenue for your firm.
For many of your clients, retirement income is a major concern. Some may feel they do not have enough assets to support their lifestyle. Some simply have not put a retirement funding plan in place. In either situation, financial planning services can lead to additional opportunities for your firm. For example, clients worried that they may “run out of money” can be introduced to annuities as a funding vehicle. This way, a portion of their assets ensure a basic lifetime income.
Higher net worth clients with well-funded retirements still need your services. Introduce your investment options as you develop a relationship with them. These clients also have issues other than money you can solve. Most wealthy individuals struggle with how much to pass on to their children and how to structure the inheritance. You can bring great relief to ILIT clients by introducing other trust and estate planning services that can solve their problems.
The Benefits of Sharing ILIT Policy Info With Grantors
Use the discussions with the grantors to open a dialogue with the beneficiaries of the ILIT that you control. Most TOLI trustees we speak with rank retaining the asset – the death benefit after the death of the insured – as one reason for handling ILITs. Yet few put in the time and effort to cultivate the next generation of wealth. Why can’t the beneficiaries be clients now so that retaining the TOLI benefit in the future will be cemented?
There are many reasons for contacting grantors to explain the policy. For clients of ITM, you have one of the best tools in the industry available to do just that. Our annual policy reports provide all of the information needed to have a fruitful discussion with your client. For clients of our TOLImonitor, a remediation specialist is available for any questions or policy modeling that might be needed.
To learn more about how our trust owned life insurance solution tolimonitor can help you better serve your ILIT clients, contact us.
1. 54% of Americans Own a Life Insurance Policy, But One-Third Not Exactly Sure How It Works, Mike Brown, September 19, 2018 lenedu.com