Irrevocable Life Insurance Trust - Case Study

Dr. Cuny is a retired radiologist. By virtue of saving and investing well, and a few savvy business decisions, Dr. Cuny’s net worth is now considerable. Several years ago, Dr. Cuny pursued purchasing a life investment policy. He wanted to manage risk, further diversify his investments, and provide his estate some liquidity following his death. His attorney advised him to use an irrevocable life insurance trust (often called an ILIT) to purchase the policy in order to keep the death benefit dollars from being subject to estate tax, and to provide asset-protection for his beneficiaries.

Dr. Cuny selected First Covenant Trust as the trustee of his ILIT because he wanted the peace of mind that his trust would be administered professionally and correctly. First Covenant ensures the terms of his trust are respected and impartially carried out and attends to all the administrative details. First Covenant ensures that Crummey letters[1] are sent out on time, that premiums are paid correctly and on time, that the policy remains sound and appropriate, and safeguards Dr. Cuny from exercising control over the policy or trust. Failure to administer the trust correctly could be costly for the family, due to death benefits being subjected to a 40% estate tax (a 7 figure problem for the Cuny’s).

At First Covenant Trust, we are able to serve as trustee of your family’s irrevocable life insurance trust. We work alongside you, your advisors and the insurance company to make sure all is administered professionally and correctly. After you’re gone, we can oversee the investments and distributions of policy proceeds for your loved ones, in accordance with your wishes. Our fees to serve as trustee of an ILIT start as low as $1,500 per year.

[1] Notices of Rights of Withdrawal, usually called Crummey Letters.