Life insurance professionals working with lawyers. There is interest in this subject. I should have written about it earlier. Here's some more Q&A from the life insurance agent world:
Question: I am a life insurance marketing manager with an agent who has a business-owner client in the Napa, Ca. area who is seeking an estate planning attorney to draft an ILIT for a life insurance policy. This, of course, could expand to other estate and business planning issues. Having saved the Worth magazine edition listing the top 100 attorneys in America, I found your name and vistied your website and blog. was wondering if you could give him an idea of the cost of drafting a simple ILIT. He says he always has clients who ask but never knows what to tell them.
Answer: Pricing "ILITs" as you would a product tends to detract from what the client really hires you for.
We do not draft an insurance trust in a vacuum, so it is impossible to quote anyone a price for a "standalone ILIT." It depends upon so many factors you cannot give a hard-and-fast rule.
I will give you an example, rather than try to make hard-and-fast rules. I have a client now who is 60 years old, meets with me about once per week for 60-90 minutes each visit, during which we discuss one aspect of his estate plan each week. He is getting married next year, so this week we discussed prenuptial agreements. He wanted to know a bit about community property, separate property, how often late-in-life couples enter into these agreements, etc. He is not a 'spendy' kind-of guy. But he is an extraordinarily successful real estate professional. He is not foolish with his money nor ignorant of the law. He knows what he wants to know, what he needs to know, and who he trusts.
Now, if this gentlemen does an ILIT (I am sure we will shortly, because we have already looked at illustrations from the agent), how would I split out how much of the counseling went into the insurance trust? How would someone in his position think of my services if I stopped the process and said "well, its $X for that kind of trust . . .")? Whah?
I'll give you another example. I have a client I have known for years and he wants to purchase insurance. He has a taxable estate. I have already drafted his Revocable Trust. I know him well enough to know who he will select for his trustees and how he will want the devolution of his death benefit to be held and administered. In this case, I will be able to draft the ILIT itself in about 45 minutes. If I charged hourly, and all he wanted was a document that his agent or someone else would ensure is properly implemented, then his fee would be 45 minutes of my time.
The first client would likely get a bill - and happily pay it - in the tens of thousands of dollars. The second client will get a bill for about $450 and also happily pay it. What we forget is that good clients come to us to handle the most important transaction of their life: the largest, and it goes to the people they love the most. If its about saving a few bucks, we are going to have what I call a "priority disconnect" (their priorities do not match the reality - of grieving families and difficult post-mortem issues - that I live with).
Where the rubber hits the road with ILITs is informing the ILIT trustee of his or her duties in setting up the ILIT account, walking them through the mechanics: getting a tax i.d. number and executing the Crummy notices properly and regularly. The most likely attack from an auditor after death would be on the administration of the trust after it is established, not the language of the trust itself (although they routinely request a copy of the trust instrument). If we have gone the extra mile and ensured that the independent trustee does his or her job (by making it very easy - with tabs where he signs, a step-by-step letter, or whatever else that particular trustee needs to accomplish his job), then in my view, we have carried out the original client's intent - to get the death benefit outside the estate.
So, you are not the first general agent or marketing manager who has asked me this question and I don't doubt you won't be the last. Our approach is not a document-driven approach, which you could get from a decent paralegal with a word processor, but rather an approach that requires us to first determine what is it that this particular client family needs - and how is that unique need best met by our office? If all they need is a well-drafted inexpensive document (e.g., their brother, the ILIT trustee, is a CPA), then we would give them the well-drafted document inexpensively. If they need to better appreciate the role of life insurance in their portfolio, and greater liquidity at their death, or at their retirement, or at the next Congress's unveiling of the new tax law, then we would probably advocate that they consider making sure that they are getting significant enough death benefit to accomplish that need.
The very few good agents we work with are pleased with the work we do for our mutual clients. Agents who welcome an approach that goes beyond the issues of fees and time will appreciate that we welcome an approach that goes beyond premiums and commissions. We are both in an area where the client's objective is driven by life-altering emotional hopes and fears, and I find that trying to quantify the value of what any one of us - including the best insurance professionals - do can be very difficult.
If a lawyer quotes a fee for "one of them thar' trusts," then I think you should consider grabbing your wallet and run the other direction. Low fees are not what drive responsible, thoughtful clients to complete their planning.
-Peter
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