Fiduciary Responsibilities For Trustees Of Trust-Owned Life Insurance

One of the most common wealth transfer and estate planning techniques is to use an irrevocable life insurance trust (ILIT) to own life insurance policies. This structure enables individuals and families to direct the transfer of assets in a tax-efficient manner from one generation to another for the benefit of the trust’s beneficiaries.

As with any trust, a trustee is designated to protect the interests of the beneficiaries and to manage the trust’s assets for their benefit, while overseeing the administration of the trust itself. For ILIT trustees, these responsibilities may be more challenging than they sound, especially if the trustee does not possess the knowledge and experience to evaluate and manage the complex financial instrument that is a life insurance policy.  Read more about the potential pitfalls when using life insurance in an ILIT.