Post on 04-Jan-2016
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© Copyright Tucker Arensberg, P.C. All Rights Reserved.
The Latest Issues in Trust Owned Life
Insurance
William Campbell Ries, Esq.Tucker Arensberg, P.C.
www.tuckerlaw.com
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Trustee Duties
TRUSTEE
TRUST
BENEFICIARY
INSURED POLICY
Only Trustee has Power to Act
$ $
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Trustee DutiesPrudent Investor Act
Care, skill, caution
Higher standard for corporate trustee
Exculpatory provisions
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Trustee DutiesInsurance
Duty to monitor
Need and qualification
Carrier solvency
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Trustee DutiesInsurance
Premiums
Improved mortality
Investment results
Lower expenses
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Trustee DutiesInsurance
Policy performance
Comparison to illustration
Not sufficient for current needs
More innovative products
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Trustee DutiesInsurance
Terminate policy
Loan
Stop paying premiums
Withdraw cash value
Exchange policy
Life Settlement
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Trustee DutiesCannot rely on Insurance Agent
No Duty to….advise on adequacy or suitabilityadvise on previously purchased policy investigate solvency of licensed carriermonitor after salemonitor adequacy of coverage after sale
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Trustee DutiesTrustee Liability
Failure to analyze difference between vanishing and level premiums
Holding inappropriate or obsolete policies
Failure to purchase enough life insurance for premium paid
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Trustee Duties – ExamplesFailure to pay premiums
Pearson v. Barr (CA)
Trustee received Crummey Gifts and did not pay premiums; new policy less favorable
Sanders v. Citizens National Bank (FL)
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Trustee Duties - ExamplesPoor policy performance
Von Hoffman v. Prudential (NY)
Heslin v. Metropolitan (NY)
Koenler v. Merril Lynch (FL)
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Trustee Duties - ExamplesBad investment decisions
Poor Vendor Selection
Phillips v. Oster (FL)
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Life SettlementsWhat is a Life Settlement?
Sell policy to third party
Receive greater than cash value; less than death benefit
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Life SettlementsViatical versus Life Settlement
VIATICAL SETTLEMENT
Terminally ill individual sells policy to investor who pays insurer a discounted face value then collects at death
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Life SettlementsViatical versus Life Settlement
LIFE SETTLEMENT
Age 60+
Life expectancy of ten years
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Life SettlementsTrustee duties
Competence of broker
Competence of provider
Review offers
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Life SettlementsInsurance carrier problems
Prohibition on transfer
Agent prohibitions
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Life SettlementsInsurance regulatory issues
37 states regulate
National Association of Insurance Commissioners
Viatical Settlements Model Act
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Life SettlementsSecurities Issues
Is purchase of policy a security?
Is sale of policy to investors a security?
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Life SettlementsFraudulent Practices
Insurance agents hiding Viator’s health
Viator’s fraud on insurance company
Viator’s fraud on settlement company
Funder Issues: godfather
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ConclusionLife Settlement adds new dimension
to fiduciaries’ management of life insurance
Prudent Investor ActTreat insurance like any other
investment
Duty to review
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ConclusionMust review policies
Need
Performance
Solvency
Coverage versus price
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ConclusionMay have to replace
Convince Settlor
OptionsTerminate policy
Replacement
Life Settlement
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QUESTIONS
William Campbell Ries, Esq.Tucker Arensberg, P.C.
412.594.5646wries@tuckerlaw.com
ADMIN 22150