life insurance POLICY management
Many people view the purchase of a life insurance policy as a one-time transaction, requiring only the payment of ongoing premiums thereafter. However, similar to other financial instruments, a life insurance policy may well be affected significantly by changes in the overall economy, by industry developments and innovations as well as changes in personal circumstances. If a policy is owned by a trust, the trustee has a fiduciary responsibility to ensure that trust assets are suitable and being prudently managed. Further, life insurance as part of an investment portfolio should be reviewed regularly in order to determine whether the policies are performing as originally projected or whether adjustments should be considered.
Arkin Youngentob Associates provides independent assessments to policy owners, beneficiaries, trustees, investment managers and other professional advisors so they can make informed decisions about insurance portfolios. A comprehensive insurance review is a written report that might include information such as:
- Updated needs assessment relative to client objectives
- Detailed policy summary including a review of policy ownership and product type
- Beneficiary audits
- In-force re-projections of future cash values and death benefits based on current results compared to original expectations
- Evaluation of the underwriting class based on current medical information
- Evaluation of policy charges and assumptions and their impact on performance
- Evaluation of the insurance company's current financial ratings and outlook
- Recommendations to bring current policies in line with initial expectations, if policies are under performing
- Evaluation of funding strategies
- Restructuring strategies such as consolidations, tax free exchanges, face amount decreases or sale of a policy to third party
- Comparative assessment of current product alternatives
If you are a policy owner, a trustee, creator or beneficiary of a trust or other interested party that owns a life insurance policy, Arkin Youngentob Associates provides a full range of services in connection with an initial review or regular, periodic ongoing assessments of life insurance policies of any kind.
Case Studies – Situations uncovered upon policy reviews
- The policy crediting or dividend rate at time of purchase was 400-500 basis points higher than the current rate and no adjustment to the contribution amount has ever been made. The policy is greatly underfunded and will lapse well before the participant's projected mortality, unless the policy funding levels are modified or policy restructuring can be implemented.
- A client's policy was issued when the client was a smoker; but the client stopped smoking over 10 years ago. Premiums still reflect the smoker classification, however an underwriting modification could significantly lower outlay.
- A policy owner took out large loans from their life policies. The loans are still outstanding and the client is paying interest rates of 7% or higher. What methods should be implemented to curtail carry costs or reduce drag on policy performance?
- A business client has a key man policy on the life of its leader. The policy is over 20 years old, the insured is 75 years old and the cash value well exceeds the contract basis. There would be a large income tax due if the policy was cashed in, thus policy objectives and options need to be reassessed.
- One child owned a policy on their mother’s life which had more than $500,000 of cash value and the beneficiaries being he and his two siblings. We pointed out the trap of a future gift tax problem and recommend how to restructure the situation in order to solve the adverse tax situation resulting from the inadvertent ownership structure.
The case study results are for illustrative purposes only. This example does not represent any specific product, nor does it reflect sales charges or other expenses that may be required. No representation is made as to the accurateness of the analysis.
Arkin Youngentob Associates, LLC does not offer legal or tax advice.