AALU: Watch Your Step: Fiduciary Pitfalls for Trustees of Irrevocable Life Insurance Trusts.
A trustee’s job in administering a trust can be unexpectedly treacherous, especially in the context of an ILIT and the management of its life insurance portfolio. Clients frequently turn to family and friends to fill this important role, since many financial institutions will not serve as trustees of an ILIT only funded with life insurance. Individual or non-professional trustees, however, are particularly vulnerable to beneficiary attacks, as they often are less knowledgeable about their duties and potential risks than institutional trustees and lack the protective shield of errors and omissions coverage. For these trustees, understanding their fundamental fiduciary duties and typical pitfalls in trust administration is crucial to avoiding unintended missteps.