The Life Insurance Policy Crisis: The Advisors' and Trustees' Guide to Managing Risks and Avoiding a Client Crisis

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American Bar Association, 2017 - Business & Economics - 252 pages
For many years, life insurance was considered one of the most ethical and stable financial services businesses. But, following the introduction of flexible premium non-guaranteed death benefit products in the early 1980s, this reputation gradually changed. Today there is a life insurance policy crisis for reasons predicted 35 years ago, and it requires attention in order to avoid policy lapse without value along with allegations of deceptive and misleading practices. How could this happen? Policy crediting rates have continually declined from the 15% non-guaranteed range to the guaranteed minimum, typically 4%. Sales agents had the software to prepare illustrations at crediting rates known not be sustainable over a 25 to 50-year time period, giving rise to the 'win the illustration contest' sales era. As the crediting rate drop to the guaranteed minimum, cost of insurance charges increased, which accelerates the probability of policy lapse especially with policies insuring seniors if corrective action is not taken. However, issuing life insurance carriers and most 'sales' agents do not offer post-sales policy risk management services, much less such services that meet a 'dispute defensible' standard. The warning signs commenced over 25 years ago but inattention has persisted. Today, many policy holders are faced with a major dilemma: either pay a significantly higher annual, or significantly reduce the death benefit, or surrender/sell the policy and lose the planning benefits they've paid into for decades, or do nothing an await lapse without value. This crisis has been covered by The New York Times and the Wall Street Journal, but unfortunately shows no signs of abating. The Life Insurance Policy Crisis pulls back the veil on this looming crisis, and explains the solutions for fixing it. Authors E. Randolph Whitelaw and Henry Montag bring their 75 years of combined experience in financial planning and insurance counseling to review the readily-available post-sales policy administration and creditable risk management options that life insurance companies, sales agents and policy owners have ignored for decades. They explain the intervention process trusted advisors can recommend to policy owners to avoid unexpected lapse, obtain creditable fact-based risk management, and ensure a favorable planning outcome. Topics include: - A history of the lapsing life insurance policy crisis and the questionable deceptive and misleading practices that led to it - A fresh look at the sustainability of existing policies - Restoring customer confidence in the life insurance policy distribution system - Reforms that can help all policies remain solvent - Best practices in litigating against the predatory practices of the life insurance industry - Sample documents and reference articles to resolve many of the identified problems

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About the author (2017)

E. Randolph Whitelaw is Managing Director of Trust Asset Consultants, LLC (TAC), a Trust-Owned Life Insurance (TOLI) risk management consulting firm, and The TOLI Center, LLC (TTC), a life insurance policy administration and risk management firm. TAC's clients are trustees, beneficiaries, professional advisors and affluent family groups. TTC provides professional fiduciaries, professional advisors, affluent families and businesses with a service-based life insurance plan administration and policy risk management platform.E. Randolph Whitelaw A leader in the TOLI risk management consulting and restructure marketplace, he is frequently engaged by professional fiduciaries and estate planning professionals to provide expert opinion and testimony in dispute and litigation matters. He lectures nationwide and regularly authors in-depth peer-reviewed articles that illustrate his comprehensive knowledge of the ever-changing life insurance and life settlement markets. Mr. Whitelaw has a corporate finance background. He spent 15 years with a major bank holding company working with its public corporation and larger private business clients. His lending experience includes coordination of multi-lender 'work-out' borrowing arrangements and interface with OCC bank examiners. As Executive Vice President, he managed the holding company's middle market business and private client group including the cross marketing of trust, investment, and life insurance services. In the mid-1980s, he co-founded a consulting firm to specialize in the unique management and business continuity planning issues of larger family businesses, affluent family groups and family offices. His company offered investment advisory, life insurance and family office support services as well as the design, implementation and management of non-qualified deferred compensation plans for public corporations. In 1993, he co-founded and served as managing partner of a feebased third-party TOLI policy administration company that developed a national reputation and clientele among regulated trustees and estate planning professionals. In 2001, he founded Trust Asset Consultants, LLC to provide corporate trustees, professional advisors, and insurance trust beneficiaries with "single source" TOLI fiduciary risk management consulting services. In 2004, he and Liz Colosimo co-founded Life Settlement Partners, LLC, a life settlement consulting firm that works exclusively with policy sellers. Henry Montag is an Independent Certified Financial Planner in practice since 1976 with offices in Long Island and New York. He is a principle of The TOLI Center East, which provides independent fee-based performance evaluation for private trustees, their advisers and institutional trustees regarding the protection of private or trust-owned life Insurance. He has had articles published in various publications including those of the New York State Bar Association, NYSSCPA's Tax Stringer, Tax Facts, National Conference of CPA Practitioners, and Suffolk County Women's Bar Association. He has lectured extensively on the proper utilization of financial products to protect and preserve assets to the New York State Bar Association, the New York State Society of CPAs, The American Institute of CPAs and the National Conference of CPA Practitioners. He has been a source for The Wall Street Journal, Investor's Business daily, Investment News, Newsday, Long Island Business News and featured in Financial Planning Magazine. He has also appeared on Fox News, News 12, Wall Street Week TV, and FIOS Money & Main Street. He has recently co-authored a book for the American Bar Association, (A.B.A), titled: "The Advisor's Guide to Managing Risk and Avoiding a Client Crisis" (Release Sept 2016).

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