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How One Small Case Could End Up Changing How You Do Business… In a Big Way

Why Maintaining Your Responsibilities To Your Clients
Is Becoming More Important Than Ever
_________________________________________________

Have you been avidly following the Rafert v. Meyer case that was recently remanded from the Nebraska Supreme Court?

No? Well, don’t worry – you’re not alone.

Rafert v. Meyer is primarily concerned with the express and implied duties of ILIT trustees, and their obligation to their policyholders and beneficiaries. The case:

  • Remanded the verdict and case dismissal of a lower trial court, effectively stating that a trustee has a non-waivable duty to keep interested parties apprised about the status of life policies held in a trust, regardless of whether or not these duties are outlined specifically within the trust language itself.
  • Confirms that a trustee has a “fiduciary” responsibility to act in the best interests of the policyholder and beneficiaries at all times.
  • Establishes that a state’s own Uniform Trust Code (UTC) can supersede provisions explicitly provided for in a “legally-binding” trust document.
  • Establishes that trust language, even when explicitly stated, may not absolve a trustee’s legal liability for an incorrectly-designed or implemented trust.
  • Established a general precedent of trustee expectations and obligations, even in states not operating on a UTC model.

To read the full opinion, you can find it HERE.

The analysis of this ruling does allow for the fact that it is a common occurrence for many policyholders and beneficiaries to relieve a trustee of many of these maintenance and reporting obligations in the trust language, in return for lower trustee fees. However, this leaves the trust effectively unprotected and sets the stage for disaster; with no maintenance and reporting criteria, the door is left open for a variety of deficiencies to occur within the trust. While it is important to bear in mind that this decision currently only affects the way trustees do business in Nebraska, it is also critical to recognize the weight of precedent that this could set in other UTC-modeled states (as of 2012, “…some 25 states have adopted some substantive form of the UTC, with three others having introduced it into the legislature for adoption”). (1)

Regardless of whether or not your state adheres to the UTC model, or whether or not a trustee has a fiduciary responsibility, it’s clear that staying on top of one’s trustee obligations is the best way to act in the client’s best interest (and of course, negate the risk of your clients filing lawsuits against you!). Few institutional trustees have the necessary level of insurance expertise for a proper policy review – this is why a system like our Comprehensive Policy Review (CPR) can be invaluable. We provide you and your client with a thorough review of their current coverage and if applicable, viable options and alternatives that have been tailored to their specific situation. And with available materials such as a needs analysis, fact finders, brochures, talking points, scripts, and letters all in one placewe make the process as simple for you as can be. Give us a call today with your next case, and find out what CPR can do for you and your clients.

One comment on “How One Small Case Could End Up Changing How You Do Business… In a Big Way

  1. TOO BAD THE POLICY WOULD TAKE 5 MONTHS TO ISSUES SINCE ALL THE UNDERWRTERS WANT APS FROM THE TIME A PERSON IS SIX YEAR OLD TO THE RIP OLD AGE OF 45!!

    Lol SOUNDS GOOD

    David Mark Calleo, CFO
    45C Prospect Street
    Midland Park, NJ 07432
    551-427-1515 Cell
    201-661-8200 Office
    http://www.calleoinsurance.com

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