Peck Financial

The following is an example of procedures used when providing this service to a large law firm client on behalf of its Partners.  Many Partners agree to act as trustee on behalf of their fellow partners but fail to fully grasp the ongoing fiduciary responsibility and ongoing procedures they must follow to properly administer the life insurance trust. Our patent pending system is undergoing major technical innovations which will actually allow advisory firms (Law firms, Accounting & Banks) the ability to offer these services to its own clients with no capital expense or staffing requirement.  These changes will allow for private labeling and reporting capabilities and ongoing revenue streams on behalf of the advisory firm.  

1. The process begins when the grantor makes a gift to a trust that owns their life insurance policy, we remind the grantor to make their gift 45 days before the actual policy anniversary or premium due date. To insure this actually happens, we send an email with the minimum gift amount needed so the trust has adequate funds to meet the premium obligation.  It is important to have the dollars gifted to the trust for at least 30 days before insurance premiums are remitted to the carrier. 
2. If your firm is using its fiduciary accounting department to oversee trust checking accounts on behalf of Partners, we are notified when proceeds have been deposited and a date is noted in our records. Upon this notification, our office, on behalf of the trustee will generate and mail pre-approved crummey letters to all trust beneficiaries named in the Insurance trust.  Two copies of the letter are provided per beneficiary (one to be returned to our office and one as their file copy).  The letter requests a signature of acknowledgement by the trust beneficiary or custodian if the beneficiary is a minor.  In all cases business reply envelope is provided for easy return of the document where it is kept on file. We scan and email an executed copy to the trustee for their records as well. Should the letter fail to be retuned the crummey notice contains language that a failure to respond will indicate a desire to waive their withdrawal rights at this time.
3. Following 30 days of the gift and the mailing of the crummey notices, our office will inform the firm’s fiduciary accounting office that it is permitted to authorize an insurance premium payment on behalf of the trust for a specific policy by number and carrier.  In most instances fiduciary accounting will prepare the check for premium payment and obtain the trustees signature.  For those carriers that permit a wire transfer of funds, the trustee can authorize the accounting department to execute the necessary wire transfer.
4. In all cases annual data verification notices are completed by the insured’s to insure we have current addresses for all applicable parties, life changes and any additions or deletions to their insurance portfolio.

Upon undertaking this process we look for ways to streamline the number of transactions required.  For example if a Partner has multiple policies with multiple beneficiaries and pays their insurance monthly, it may require dozens of letters per month.  One way to stream line the process would be for the grantor to make one large gift per year regardless of the number of policies along with one set of crummey letters.  With respect to firm sponsored coverage i.e. group life or group universal life we will generate letters once a year as the partner is typically not charged for this coverage until year end irrespective of the payment frequency the firm uses.

If you’re an individual who has purchased life insurance owned by a trust you must follow IRS guidelines to prevent inclusion of that asset in your taxable estate. 

Your trustee must be aware each time a gift is made to your trust so they may inform the trust beneficiaries that they have withdrawal rights to those gifts. A trustee who fails to send timely crummey letters or does not allow for enough time between the actual gift and payment of insurance premiums is placing the insurance proceeds at the risk of being included in the grantors taxable estate.  This result would be the most costly breach of fiduciary responsibility because the beneficiaries would not realize the full extent of the death benefit due to added estate taxes.

We will help you and trustee remain in compliance with IRS guidelines and providing you the back up needed if your trust life benefits are contested.