I received a call from a fiduciary the other day inquiring about selling a life insurance policy in an irrevocable life insurance trust (ILIT). This question comes up fairly often.
Specifically, here are the questions this fiduciary asked:
1. Is it permissible for a trustee of an ILIT to sell the policy?
From the perspective of the life settlement market, the short answer is — yes. Clearly, the trustee needs to be sure that selling the policy is in the best interest of the trust and beneficiaries. The proceeds of the sale go to the owner of the policy.
2. Does it depend on the specific provisions of the trust?
The buyer will want to see a copy of the trust. Most policies sold are trust-owned.
What Your Peers Are Reading
3. Does the fact that a policy is owned by a trust in any way affect its value in the secondary market?
The ownership status in no way affects the value. Buyers evaluate trust-owned life insurance policies in exactly the same way they evaluate individual-owned life insurance policies. The numbers are the numbers.