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Re-examining Your Client’s Trust-Owned Life Insurance Policy

Many wealth managers and estate-planning advisors will counsel their high-net-worth clients to purchase life insurance policies inside of a trust. Trustees, which are often professional management firms, then maintain the policies, which are often professional management firms. This can be very smart financial planning, as trust owned life insurance (TOLI) can allow families to achieve a variety of important tax planning and charitable giving objectives.

When a trust owns life insurance, the trustees are assigned the responsibility (under the prudent investment rule and relevant state laws) to exercise proper oversight of that asset in the trust. This involves evaluating the financial health of the policy, considering prudent techniques for paying the policy premiums and managing the policy in a way that integrates with other estate-planning strategies.

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