TOLITrust Owned Life Insurance
TOLIThunderwater Organizational Learning Institute (Richland College; Texas)
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Take the case of a healthy couple age 60 where an ILIT acquires a $10 million TOLI policy with an annual premium of $90,000 per year.
Banks and other third party lenders will make loans to an ILIT to acquire a TOLI policy.
Like TOLI, it offers an asset value that grows on a tax-advantaged basis, providing the VEBA an opportunity to allocate policy assets among a mix of equities and bonds to offset plan costs.
Although its long-term economics are not quite as good as TOLI, it provides a better match to cash flow because it reimburses annual claims expenses.
In the estate-planning arena, where the use of TOLI is prevalent, life insurance is often used to provide sufficient liquidity to fund estate taxes and final expenses.
A recent study in the Journal of Financial Service Professionals ("Trust-Owned Life Insurance: Issues Trustees Face; Decisions Trustees Need to Make," July 2005, page 39) indicates that anywhere from 70% to 95% of TOLI had no servicing agent.
The Clark survey recorded similarly high percentages for rabbi trusts, as well as COLI and TOLI, within supplemental executive retirement plans.
To administer their TOLI polices while being provided with a non-biased review of the trust asset and the "upgrade" opportunities that may be available in today's more efficient marketplace.
To exit the TOLI business due to a change in business model or available resources.
At the two companies with which we have been involved in funding with TOLI, people have difficulty understanding the role life insurance plays in the TOLI structure.
RANADE: We've found with many companies there's confusion between TOLI and COLI, and there are some unpleasant memories of COLI.
A number of fully funded TOLI policies can be used to provide the benefits, such as variable life or policies indexed to outside indicators such as Moody's Bond Index.