What Accountants Should Consider Before Becoming Trustees of Life Insurance Trusts

Bruce L. Resnik, JD, MBA, CPA/PFS

Ownership of life insurance policies by trusts is a frequently used estate planning technique for moving death benefits out of a decedent's taxable estate or providing beneficiaries with liquidity after a decedent passes. While accountants are often called upon to act as trustees of life insurance trusts because they are among the most trusted of all advisors, both trustees and grantors should realize that life insurance policies are sold on the basis of illustrations that are projections of long-range future performance. Actual performance often is much different from such projections and can lead to serious consequences for both grantors and their beneficiaries. Because of that fact, and in light of recent court cases, monitoring the actual performance of life insurance policies may be one of the most important functions that a trustee can perform.