Even though most non-professional trustees are designated based on their personal relationships rather than life insurance experience, they are still legally held to the same standards as fiduciaries. Without industry knowledge and experience, some non-professional trustees may not fully understand the scope of their responsibilities and the potential for liability exposure that they face if they are not establishing a process for ILIT management. To learn more about these responsibilities, check out our latest white paper below.
Non-Professional Trustees: ILIT Responsibilities
Non-Professional Trustees
Non-professional trustees are generally chosen based on personal relationships. They typically lack the knowledge and experience of professional trustees and in most cases do not realize the full extent of their fiduciary role.
To ensure there are no incidents of ownership for irrevocable life insurance trusts (ILITs), someone other than the grantor of the trust must be appointed to act as trustee, and they are responsible for managing the trust assets.
A family member, friend, or co-worker that has been asked and has agreed to take on this role is known as a non-professional trustee.
Fiduciary Role for Non-Professional Trustees
A non-professional ILIT trustee is considered by law to be a fiduciary. They have the same responsibilities and duties as professional trustees which involve being ethically obligated to act in the trust’s best interests.
If a non-professional trustee is not performing their duties or not achieving the best possible outcomes for the trust beneficiaries, it is referred to as “fiduciary risk”.
Non-professional ILIT trustees have tremendous responsibilities and are required to act in trust’s best interests, while maintaining a strict “duty of care”. Their fiduciary obligation is ongoing and requires them to always make appropriate decisions, regardless of their own self interests.
Fiduciary Duties
- Avoid conflicts of interest
- Act in the trusts best interest
- Never act for their own self-interest
- Provide proper oversight
- Make decisions that protect and/or enhance trust assets
Irrevocable Life Insurance Trusts - Non-Professional Trustee Responsibilities
Ongoing ILIT Management
- Filing Tax Returns
- Managing Crummey Letters
- Handling Premium Gifts
Ongoing Policy Management
- Evaluating Carrier Strength
- Reviewing Product Alternatives
- Monitoring Client Circumstances
- Tracking Policy Performance
Proformex supports non-professional ILIT trustees by establishing a process for sending premium gift reminders, producing Crummey letters, verifying premium payments, and continually monitoring policy performance.
To learn how Proformex helps support and reduce liability concerns for non-professional ILIT trustees, visit our website.
