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 Role for Non-Professional Trustees
- Avoid conflicts of interest
- Act in the trust’s 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
- Filling 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 of 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.
About Mike Pepe
Mike Pepe, the visionary founder and President of Proformex, has transformed his two decades of life insurance expertise into a pioneering SaaS platform dedicated to enhancing post-sale service for life insurance policies. Starting his career at Mass Mutual and later co-founding River Financial Group, Mike honed his focus on holistic financial planning, eventually leading to the creation of The TOLI Group to address the crucial need for insurance consulting and ongoing policy management. With a personal commitment to innovation, Mike developed the foundational software that evolved into Proformex.