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Cerulli Promotes Life Insurance Trusts

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NU Online News Service, Aug. 3, 2004, 5:20 p.m. EDT

Financial advisors should consider making more use of life insurance trusts to help rich clients transfer wealth.[@@]

Consultants at Cerulli Associates, Boston, make that argument in a new report on the wealth transfer market.

The consultants point out that members of the “Silent Generation,” or adults born between 1925 and 1941, will begin dying and passing assets to heirs even before the majority of rich baby boomers get serious about wealth transfer.

Between 2001 and 2046, the boomers alone will transfer about $14 trillion in the form of bequests and give $5 trillion to charity, the consultants predict. The boomers could end up paying about $13 trillion in federal and state estate taxes if Congress gives up on efforts to eliminate estate taxes, the consultants add.

Many advisors already use marital deductions and bypass trusts in financial plans, but more advisors should be developing customized plans that use generation-skipping trusts, Crummey trusts and properly designed life insurance trusts to help the richest clients, the Cerulli consultants argue.

“The correct usage of [life insurance trusts] is an advisor best practice,” the consultants write.

Insurers should encourage life agents to refer clients to trust attorneys by educating advisors about the benefits and nuances of life insurance trusts, the consultants write.


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