In the realm of trust owned life insurance (TOLI), we currently find ourselves navigating a confluence of challenges, creating a compelling case for outsourcing Trust Owned Life Insurance administration and policy management. While there are numerous articles detailing the benefits of outsourcing, three key motivations stand out:
Increasing Liability and Workload
Managing life insurance policies has become progressively challenging. A decade of historically low interest rates, a volatile equity market, and the emergence of increasingly complex insurance products have made the task of optimizing policy value more arduous.
Additionally, changes in estate tax laws are leading to a surge in grantors seeking guidance on their policies. As a trustee, your fiduciary responsibility remains the maximization of assets for beneficiaries. Analyzing the countless options and staying updated on industry trends is no small feat. By outsourcing to experts, this challenge can be effectively addressed, allowing you to focus on other important aspects of your client’s plan.
Read more: Unlocking the Potential of ILITs: Minimize Liability and Maximize Value
Cost Efficiency
Many trustees overseeing life insurance trusts are unaware of the full spectrum of expenses incurred. Outsourcing trust management facilitates a clear understanding of costs. In most cases, the expense of outsourcing is lower than retaining the task in-house.
The economies of scale achieved when handling numerous trusts significantly reduce the cost per trust. This cost reduction is one of the prime benefits of outsourcing, particularly when managing complex assets such as life insurance. Knowing your exact expenses and potentially reducing them represents a compelling reason to embrace outsourcing in today’s competitive landscape.
Firms that have already ventured into TOLI outsourcing have experienced immediate relief in the administration of irrevocable life insurance trusts. Simultaneously, their client’s service quality has witnessed a significant boost. Moreover, the financial logic behind this transformation is sound. By choosing to outsource, these firms have unlocked greater operational efficiency, ensuring their long-term success in the TOLI industry.
TOLI Market Growth
The TOLI market isn’t experiencing substantial growth. While life insurance trusts have diverse applications, most were initially established to cover federal estate taxes. However, the landscape has shifted significantly. The Federal estate tax temporarily increased in 2019 to 11.4 million per person or $22.8 million for married couples due to the 2017 Tax Cuts and Jobs Act.
However at the end of 2025, the higher exemption amounts are set to expire and revert to the 2017 levels (adjusted for inflation). This means that if no further changes are made, the exemption amount will decrease significantly, affecting wealth transfer strategies for high-net-worth individuals and potentially a boon for life insurance trusts.
If you are ready to mitigate the risk and expenses associated with managing trust owned life insurance with your existing in-house team, ITM is uniquely positioned as the nation-leading ILIT servicing provider for trustees. Our tolimonitor solution allows you to capitalize on the benefits of outsourcing your trust-owned life insurance while delivering superior results to grantors and beneficiaries. For more information about our tolimonitor solution, contact us today!
