After the decision of the case In Re Stuart Cochran Irrevocable Trust (“Cochran”), trustees of a life insurance trust (ILIT) have clear notice of their fiduciary responsibilities in managing trust assets even if it is only the life insurance policy on the maker’s life. After this first-of-its-kind case, beneficiaries may now be able to sue trustees for failing to employ a “prudent process” in managing the trust assets.

Too many of us do not consider our life insurance policy after purchasing it. However, life insurance is an asset class like any other in our portfolio that needs to be reviewed and monitored. Substantial premiums may be preserved as a result. Having policies reviewed by an outside, independent entity, that has no financial stake in the review process may be the best means to prevent a court decision that a trustee did not fully and adequately manage and protect trust assets. A trustee’s duty to manage trust assets includes determining if an existing life insurance policy should be exchanged for a new policy that minimizes costs and maximizes benefits.

With mortality tables and interest rates recently modified we too should have our life insurance policies reviewed. It is critical for trustees and life insurance owners to routinely review life insurance policies. Contact me to suggest agents that really conduct independent reviews and who can compare your existing policies and their costs, with like policies and their costs the entire industry.