FAQ - Frequently Asked Questions
Why focus on trusts that typically represent only a small portion of insurance trusts?
While trusts that contain more than one policy typically represent only a small portion of insurance
trusts, they command more of attention because they are held by the largest clients, raise the largest
risks and liabilities, and are the source of the most non-compliance and administrative complexities and
inefficiencies. OIPM specializes in meeting these needs.
These are the trusts that keep you up at night, and are the hardest to put to bed year after year!
Why there is a greater and more urgent need for holistic management in 2018?
Multiple regulators are prioritizing this enforcement, creating a greater likelihood of an audit, a greater
likelihood of being cited for non-compliance, greater consequences if cited and the elevation of priority
to strategic level.
What are the additional steps required when managing these trusts " as a whole," beyond
those required for trusts comprised of only a sole policy, managed "individually?"
First, each policy (and each carrier’s financial condition ) is evaluated to arrive at a set of action steps
(such as: if to be retained, the premium level to remit to the carrier, rebalancing, and which policy
options to exercise) as if it were the only policy in the trust.
The policy must then undergo another set of analysis to determine if those action steps are most
appropriate when considered in the context of: continually reducing the “collective” cross policy
costs and risks , and improving the “ collective “ cross policy productivity and suitability.
These second steps assess this policy’s relative ( cross policy) condition, needs, and opportunities, to
identify how this policy can interact, interoperate, and be integrated with the others to put all the trust
resources to their “highest and best use.”
The interaction, interoperability, and integrability components include:
identifying how this policy can subsidize / be subsidized by each of other policies in the trust,
such as: is the premium intended for this policy best used for this policy vs. best redirected to other
policies that might benefit more,
assigning a distinct role to each policy to play in the trust ,to get the best cross policy results,
such as: this policy is the best for securing maximum death benefit for minimum premium, while
another is best for securing premium flexibility, or best for accumulation or distribution,
optimizing their combined "as a whole" accumulation/ distribution/ and death benefit end goal
function ( purpose) in the estate, such as: the single life death benefits are earmarked to pay the
premiums on the survivorship coverage or repay outstanding loans upon the first death.
If a new policy is added into an existing sole policy trust, the existing sole policy must now be
managed, evaluated, and have its performance measured / reported differently than it was just prior
to the addition of the second policy to the trust.
Are the additional steps, “distinctions with a difference,” generating different action items?
In many cases, the additional steps will generate a very different set of action steps determinations,
such as: a different premium level to remit to a specific carrier, different rebalancing logistics, or
different conclusions on exercising policy options.
These apply cross policy: premium redirection / cash migration / strategic asset allocation.
What are some examples of possible different action steps generated?
Examples of how "trust level" decisions might differ from "policy level" decisions:
Allocating a limited premium gift between: a well-funded policy that has the lowest " cross-
policy" cost of insurance vs. a severely underfunded/ under-performing policy with the highest "cross-
policy" cost of insurance.
Managing on a "policy level" ("individually") might allocate premium to the well funded policy.
Allocating the "aggressive growth" sub-asset portion into first policy if it was a variable
universal life , and "cash value accumulation " tested that is near the "corridor" vs. the second policy
that is also a variable policy , but was "guideline premium " tested and has almost reached its premium
Managing on a "policy level" ( "individually") might not need to be as risk averse , thus might
allocate the "aggressive growth" into the first policy and allocate only "fixed income " into the second
policy to be more conservative.
Reducing the face amount of a participating whole life ,single life policy issued by a carrier
with the highest financial rankings ( situated in a Dynasty Trust for over three years) , vs. reducing
the face amount of a highly term blended universal life , severely underfunded survivorship policy (
that was just gifted into a non-Dynasty Trust within the last year).
Managing on a "policy level" ( "individually") might find a reason to reduce the whole life
policy instead of the universal life policy.
As you can see, managing on a " account level" ( "collectively" ) might result in a different action
step. Thus, it is risk and compliance critical to add another step when managing policies situated in
multiple policy trusts.
Which multiple policy trusts can benefit most?
The multiple policy trusts can benefit most are those that face the greatest risks to successful benefit
payouts, such as: those policies with multiple impairments (such as: substantially underfunded and
under- performing, heavily loaned , and weakened carrier rankings ), particularly if no further
premiums will be forthcoming.
They can benefit most, especially if trapped because grantors/ trusts are:
• unsuited for policy replacement as the primary vehicle for remediation or optimization,
• unsuited for premium increase or face amount reduction as the " what gives."
Additionally, those which hold insurance assets as part of their overall investment portfolio can benefit
most, especially if using the insurance to boost performance.
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