LIFE INSURANCE PORTFOLIO ANALYSIS Critical Fiduciary Responsibilities

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1 LIFE INSURANCE PORTFOLIO ANALYSIS Critical Fiduciary Responsibilities gskadvisors.com

2 Life Insurance Portfolio Analysis The Life Insurance Portfolio Analysis provides trust fiduciaries with a comprehensive evaluation of the performance of Trust-Owned Life Insurance (TOLI), as well as recommendations to optimize these policies. A Heightened Level of Accountability Fiduciaries face many responsibilities regarding trust asset portfolio management. Given the volatility of today s equity marketplace, it is necessary to perform periodic reviews of trust assets. However, since life insurance is often viewed as a long-standing asset whose purpose may not be needed for decades, TOLI policies are often overlooked; failure to review them could be detrimental. The Uniform Prudent Investors Act [UPIA] Sets standards for managing, reviewing and monitoring trust assets, including TOLI policies, for the benefit of all beneficiaries as any prudent investor would Holds them to a standard of reasonable care, skill and caution Adopted by most states, however states are not compelled to adopt uniform laws Those states that do adopt the laws may vary from the uniform act Financial advisors must become familiar with the laws of their states Fiduciaries are required to manage the costs and maximize the benefits of TOLI policies. This entails a sophisticated risk/return analysis to investigate the suitability of underlying costs of insurance charges, policy expenses and policy-earning assumptions. Due to the great level of care required in managing asset portfolios, fiduciaries are permitted to delegate certain responsibilities to third-party advisors. In accordance with UPIA, the Life Insurance Portfolio Analysis provides access to resources and solutions, which encompass most fiduciary responsibilities. Performing the audit fulfills many UPIA requirements by evaluating and possibly improving the performance of TOLI policies. *The UPIA was drafted and recommended for enactment by individual states at the National Conference of Commissioners on Uniform State Laws in States have not been compelled to enact the UPIA and there are a wide variety of methods by which states have adopted the provisions.

3 STANDARDS FACTORS There are many standards set, but the ones particularly relevant to life insurance policies are: Assess risk tolerance, taking into consideration the purposes of the trust and the relevant circumstances of the beneficiaries Consider the general economic conditions and expected tax consequences of investment decisions or strategies Diversify the trust assets adequately Consider an asset s special relationship or value, if any, to the purposes of the trust Outcomes can be affected by any of the following: Fluctuations in interest crediting rates, dividend rates or sub-account performance Inflation Longer life expectancies Medical advancements Industry improvements in product and pricing Availability of secondary guarantees New riders Changing client needs Did you know? 74 percent of existing TOLI policies can be restructured to provide greater value 2 At least 32 million U.S. households own insurance policies not appropriate for them 3 64 percent of insureds do not know what they currently have or why they bought a policy 4 1 TheInsuranceAdvisor.com, Inc. Third Annual Trust-Owned Life Insurance (TOLI) Compliance and Best Practice Survey, August 20, Ash Brokerage Advanced Markets Internal Marketing Study, Insurance Information Institute, TheInsuranceAdvisor.com

4 LIFE INSURANCE PORTFOLIO ANALYSIS PROCESS LIFE INSURANCE PORTFOLIO ANALYSIS CASE STUDY Analyze policy performance and future projections relative to original projections Current Policy Facts Retired couple owns Survivorship Whole Life policy held in an ILIT Both were issued as Standard Non-Tobacco users Assess medical risks to determine whether mortality charges and policy expenses are in line with the most up-to-date medical underwriting classifications available Renegotiate with carriers to obtain the most competitive offers available in the market today Review product and planning tactics to ensure they are aligned with current goals and objectives $4 million death benefit, including $973,000 of one-year term insurance Cash surrender value of $1,097,888 Annual premium of $119,237 Analysis Results New premium of $24,187 (annual savings of $95,050) Husband was approved at Standard Non-Tobacco and wife was approved at Preferred Non-Tobacco Same death benefit guaranteed to age 100 Determine financial stability of policy carrier Evaluate results to generate a recommendation: Maintain or consider other options

5 GSK Insurance Strategists, LLC provides comprehensive financial and insurance solutions for high net worth individuals, business owners and corporate executives. We offer Life Insurance, Disability Insurance and Long Term Care products from over 50 carriers, providing clients with optimal pricing with the most stable and reputable carriers in the industry. Services include Strategic Insurance Solutions, Life Insurance Portfolio Analysis, Asset Protection, Business Insurance Solutions and Financial Planning. Our client focused approach enables us to provide the highest level of service, while always placing client needs and goals first. We offer fee and/or commission service options that are individually tailored to provide customized solutions. Coral Gables 2121 Ponce De Leon Blvd. 11th Floor Coral Gables, FL Hollywood 4000 Hollywood Blvd. Suite 215 South Hollywood, FL Fort Lauderdale 2400 E. Commercial Blvd. Suite 517 Fort Lauderdale, FL Boca Raton 2255 Glades Rd. Suite 324A Boca Raton, FL gskadvisors.com