Trilogy Policy Performance Management

Trilogy Policy Performance Management

Posted by on Jul 14, 2011 in Trilogy Policy Performance Management, Wealth Planning | Comments Off on Trilogy Policy Performance Management

Trilogy Policy Performance Management


“The vast majority of life insurance policies funding trusts are not performing as originally projected.” – Pennsylvania Bar Association CE Credit Course Textbook on trust owned life insurance – 12/7/2003.


“A 1998 study showed that in 75% of trust policies that were at least 5 years old, the death benefit could be increased by 40% without any increase of premium.” – Trust & Estates Magazine, May 2003.


The Uniform Prudent Investors Act (UPIA) provides guidelines for trustees and is a valuable resource for measuring the prudent management of trust assets including life insurance.  For instance:

  • No particular investment is inherently prudent or imprudent;
  • The trustee’s liability for improper conduct will be measured by reference to the total return that should have been expected.  Thus, a positive return will not necessarily protect a trustee from liability;
  • A trustee is at risk, even with a positive return, if the trustee cannot demonstrate that it conducted a thorough and ongoing process for each trust, incorporating the current standards in the investment management industry;
  • Delegation is permitted, encouraged and in some cases required; and
  • A professional trustee should not remain in the business unless it has the resources required by the UPIA process and that it can prove its compliance.


The Office of the Comptroller of Currency (Section 12, Banks and Banking, Part 9, Fiduciary Activities of National Banks) 9.6 outlines the Review process for Fiduciary Accounts.  Simply put, the process includes:

  • Pre-acceptance Account Review
  • Initial Post Acceptance Account Review; and
  • Annual Account Review


The UPIA places significant emphasis on trustee’s process and reviews and the OCC Regs require it.  If a policy has not been reviewed in several years, immediate action is recommended.


Establishing a Policy for Review


At Trilogy Wealth Advisors we can help you establish your trust’s process for review and annual documentation requirements.


There are several components necessary to establish a process for managing trust owned life insurance.  For example:

  • Establish written guidelines and measures for the performance of the asset – an Investment Policy Statement (IPS.)  This statement will establish critical items such as: Goals of the Trust, funding measures for the policy, types of policies allowed, death benefit requirements, review of policy, replacement guidelines.
  • Annual In-Force Ledger Review – Carrier financial analysis, current policy performance, estimated policy performance, policy design options, current funding commitments, surrender charges.
  • Marketplace Review – Has the marketplace created more competitive policies, are economic trends positive or negative for the current policy, is the policy still appropriate for the trust per the IPS?
  • Documentation – Have appropriate Crummey notices been sent to beneficiaries, have annual gift notices been sent to Grantors, have premiums been paid on time, are 5×5 and Hanging Powers being tracked appropriately?