TRUSTEE AND FIDUCIARY LIFE INSURANCE REVIEWS
Kelly Insurance Group conducts life insurance policy reviews for trustees and fiduciaries responsible for trust-owned life insurance — confirming policy performance against original projections, identifying lapse risk in underfunded universal life policies, and providing the documented review that satisfies a trustee's ongoing fiduciary duty.
TRUSTEES AND FIDUCIARIES: CHECK EACH ITEM THAT HAS BEEN REVIEWED FOR TRUST-OWNED POLICIES.
Each unchecked item represents a potential fiduciary exposure. Trustees have an obligation to review trust-owned life insurance policies as part of their ongoing duties.
Check each item your trust-owned policy review has addressed.
REQUEST A TRUSTEE POLICY REVIEW
THE FIDUCIARY DUTY TO REVIEW TRUST-OWNED LIFE INSURANCE IS REAL — AND OFTEN NEGLECTED.
TRUSTEES HAVE A LEGAL DUTY TO REVIEW TRUST-OWNED LIFE INSURANCE POLICIES
A trustee who accepts responsibility for an ILIT or other trust that holds a life insurance policy has a fiduciary obligation to monitor the policy's performance. Allowing a trust-owned policy to lapse, underperform against its projections, or remain unreviewed for years is a breach of the duty of prudent administration — and a source of personal liability for the trustee.
UNIVERSAL LIFE POLICIES PLACED DECADES AGO ARE THE HIGHEST RISK
Universal life policies placed in the 1980s and 1990s were frequently illustrated at crediting rates of 8% to 12% — rates that have not been sustained. A policy illustrated at those rates and never reviewed may be significantly underfunded, at risk of lapse, or already lapsing. An in-force illustration — requested directly from the carrier — reveals the current picture. Many trustees discover the problem only after the policy has lapsed.
A POLICY REVIEW IS NOT A REPLACEMENT RECOMMENDATION — IT IS DUE DILIGENCE
Requesting an in-force illustration, reviewing the carrier's financial strength, comparing the policy to current market alternatives, and confirming that the coverage still serves the trust's purpose are all components of a trustee's ongoing responsibility. These actions do not require replacing the policy — they require understanding it. Replacement may or may not be warranted; the review determines that.
EXPLORE MORE TRUST AND ESTATE LIFE INSURANCE RESOURCES
FREQUENTLY ASKED QUESTIONS.
What is a trustee's fiduciary duty regarding life insurance policies?
A trustee who administers a trust that holds a life insurance policy has the same duty of prudent administration that applies to other trust assets. This includes monitoring the policy's performance, confirming premium payments are current, reviewing the carrier's financial strength, and ensuring the policy continues to serve the trust's stated purpose. Failure to review trust-owned life insurance is a breach of fiduciary duty.
How often should a trustee review a trust-owned life insurance policy?
Most fiduciary standards suggest a comprehensive review every three years at minimum, with additional reviews at any material change to the policy, the estate plan, or applicable tax law. An in-force illustration should be requested from the carrier at each review. More frequent reviews are appropriate for universal life policies with crediting rate risk or policies approaching the original illustrated maturity date.
What is an in-force illustration and how does a trustee obtain one?
An in-force illustration is a projection of the policy's future performance — cash value, death benefit, and premium requirements — based on current assumptions. The trustee or their authorized advisor requests it directly from the insurance carrier, typically through the servicing agent or the carrier's policy service department. The illustration must be distinguished from the original sales illustration, which may no longer reflect the policy's actual trajectory.
What should a trustee do if a universal life policy is underfunded?
Options include increasing the premium to keep the policy on track, reducing the death benefit to extend coverage with existing premiums, replacing the policy with a better-performing product using a 1035 exchange, or — if the coverage gap is irreparable — notifying the beneficiaries and the trustee's legal counsel of the situation. Acting promptly when underfunding is identified reduces both the financial and legal exposure.
Can a trustee be held personally liable for a lapsed trust-owned policy?
Yes. A trustee who neglects to monitor a trust-owned life insurance policy and allows it to lapse through inaction can face claims from trust beneficiaries for breach of fiduciary duty. The damages are the economic value of the lapsed death benefit. Trustees who maintain a documented review record — in-force illustrations, premium confirmations, carrier reviews — have a significantly stronger defense if a policy does lapse for reasons beyond their control.
Does Kelly Insurance Group work with trustees directly?
Yes. Kelly Insurance Group conducts trust-owned life insurance reviews for individual trustees, corporate trustees, and trust companies — providing in-force illustration analysis, carrier financial strength review, policy performance assessment, and written review documentation suitable for trustee files. We work alongside estate planning attorneys and trust counsel to ensure the review process satisfies both fiduciary and legal standards.
READY TO GET STARTED?
FULFILL YOUR FIDUCIARY DUTY WITH A DOCUMENTED TRUSTEE POLICY REVIEW.
Kelly Insurance Group conducts comprehensive life insurance policy reviews for trustees and fiduciaries — in-force illustration analysis, carrier financial strength review, policy performance assessment, and written documentation for trustee records.
The availability of coverage and eligibility for coverage can depend on numerous factors. We cannot guarantee that all customers, individuals, and businesses looking for coverage will be successful in these efforts when contacting our team. All policy coverages and terms need to be fully reviewed by the respective consumer to ensure the coverage asked for is what is specifically being quoted or provided by any insurance policy. Insurance Policies, Coverage Changes, and their terms and conditions are not bound or altered until written confirmation is provided by one of our licensed team members or underwriters. This page does not offer legal advice, legal opinions, or policy interpretations. Rather, this page is meant as a resource to help provide customers and insurance consumers with additional considerations that may help in their insurance buying or pursuit of insurance information. Kelly Insurance Group does not employ or direct attorneys.
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Disclaimer: Coverage availability and eligibility may depend on many factors, including underwriting review, carrier guidelines, policy terms, state requirements, business operations, risk characteristics, and other information provided during the application or quoting process. Kelly Insurance Group cannot guarantee that every individual, customer, organization, or business seeking coverage will qualify for, receive, or successfully place insurance coverage. All policy coverages, exclusions, conditions, limits, endorsements, and terms should be carefully reviewed by the consumer, insured, or applicant to confirm that the coverage requested is the coverage being quoted, offered, or provided. Insurance coverage, policy changes, endorsements, cancellations, and other policy terms are not bound, changed, confirmed, or altered unless and until written confirmation is provided by a licensed Kelly Insurance Group team member, the applicable insurance carrier, or an authorized underwriter. This page is provided for general informational purposes only and does not provide legal advice, legal opinions, insurance coverage opinions, or policy interpretations. Information on this page should not be relied upon as a substitute for reviewing the actual policy language or consulting appropriate professional advisors. Kelly Insurance Group does not employ, supervise, or direct attorneys.