Trust-owned life insurance is the most under-managed asset class on most trust platforms, and the exposure is not paying premiums late — it is surrendering or lapsing a policy without ever testing what the secondary market would have paid. Ohio’s Trust Code adopts prudent investor principles at R.C. Chapter 5809, and a policy held in trust is trust property subject to the same duty to manage as any other holding.
This page is written for trust officers and corporate fiduciaries administering Ohio trusts. It covers what belongs in an annual TOLI review packet, the authority and consent questions to resolve before any market test, the litigation history that made policy review standard practice, and how a referral works.
A free, no-obligation review starts with the policy cover page and typically returns in one to two business days. Call (305) 209-7183.
In This Article
- Resolve Authority and Consent Before You Test the Market
- Why TOLI Review Became Standard Practice
- What Belongs in the Annual Review Packet
- The Ohio Framework
- Where the Grantor’s Long-Term Care Picture Enters
- The Candidate Screen and Realistic Ranges
- How a Referral Works
- Educational Only
- Frequently Asked Questions
Resolve Authority and Consent Before You Test the Market
Two threshold questions, in this order. First, does the instrument grant the trustee power to sell trust assets generally and insurance specifically, or does it contain directions — retain-the-policy language, an insurance-trustee carve-out, a directed-trust provision assigning that decision elsewhere — that constrain you? Ohio’s Trust Code, R.C. Chapters 5801 through 5811, supplies default powers, but the instrument controls where it speaks.
Second, beneficiary consent and notice. Depending on the trust, the beneficiary class, and the change contemplated, you may want consent or a nonjudicial agreement under the Ohio Trust Code’s consent and representation provisions in R.C. Chapter 5810, or the protection of court instruction. Resolve both questions before soliciting offers. A market test run without authority is a problem even when the price is good, and beneficiaries who learn about a sale after the fact react to the process, not the number.
Why TOLI Review Became Standard Practice
The litigation history is the reason. The line of cases usually cited in TOLI practice involves trustees who accepted an insurance policy into trust, paid premiums as directed, and never evaluated the policy’s performance or the trust’s continuing need for it — the Cochran v. KeyBank matter is the citation most frequently referenced, and you should verify the citations, holdings, and procedural posture before relying on them in a committee memo. What survived from that period, regardless of individual outcomes, is an industry expectation that a corporate fiduciary evaluates a policy rather than merely custodies it.
Some trusts respond with exculpatory language or an insurance-specific trustee direction. Those provisions help, but they are not a substitute for a documented review process, and their enforceability is instrument-specific and subject to Ohio Trust Code limits on exculpation. The practical posture that holds up is simple: an annual file entry showing what you looked at, what you concluded, and why.
What Belongs in the Annual Review Packet
The carrier’s annual statement is not enough. It reports what happened, not what will happen. The essential document is a current in-force illustration run at both guaranteed and current assumptions — that pair is what reveals the silent failure mode of universal life: a contract illustrated decades ago at crediting rates that never materialized, now consuming its own account value with a maturity date years earlier than anyone in the file believes.
Around that, four more items. Whether the trust’s original purpose still exists — estate liquidity, equalization, business continuity — or ended when the exclusion rose or the business sold. Whether funding is intact, or whether Crummey gifting stopped and premiums are now coming from policy values. Carrier financial strength and any cost-of-insurance rate increases affecting the block. And, when the file points toward surrender or lapse, evidence of what the secondary market would pay. That last item is what converts a review from a status report into a decision record.
The Ohio Framework
Sales of life insurance policies in Ohio are governed by Ohio Rev. Code Chapter 3916, the state’s viatical settlement law, administered by the Ohio Department of Insurance, which licenses providers and brokers and prescribes disclosures, contract requirements, and anti-STOLI prohibitions. Confirm the current text and any 2026 amendments with the Department before relying on a specific provision in a memo to a beneficiary or a trust committee.
Structural features common across regulated states are worth citing in that memo: a waiting period of typically two years from policy issue, with hardship exceptions for terminal or chronic illness, divorce, retirement, or bankruptcy; independent escrow of funds; and a rescission window after funding of roughly fifteen days. On the beneficiary side of the ledger, note that a settlement is a sale of trust property, not a distribution — the proceeds remain trust assets subject to the instrument’s dispositive terms, which is often the first question a beneficiary asks.
| Annual TOLI Review Item | Source Document | Failure Mode It Catches |
|---|---|---|
| Policy performance | In-force illustration at guaranteed and current assumptions | UL maturing years earlier than the file assumes |
| Funding status | Premium history; Crummey notice record | Gifting stopped; premiums drawing on account value |
| Continuing purpose | Trust instrument; current estate projection | Coverage insuring a liability that no longer exists |
| Carrier and cost trends | Ratings; COI rate change notices | Rate increases eroding projected values |
| Authority to sell | Instrument; R.C. Ch. 5801–5811 | Market test run without power to act |
| Beneficiary consent | R.C. Ch. 5810 consent and representation | Process objections after the fact |
| Exit comparison | Surrender quote vs. market test | Surrender without documenting the alternative |
| Market range | GAO-10-775 | ~10–35% of face; ~4–8x surrender — ranges, not projections |
Where the Grantor’s Long-Term Care Picture Enters
On personal trusts, the insured’s own care funding sometimes becomes the reason the policy is reconsidered. Ohio’s long-term care Medicaid is administered by the Ohio Department of Medicaid, with MyCare Ohio managed long-term services and the PASSPORT home-and-community-based waiver, and the individual countable-asset limit is $2,000 as of 2026 — confirm current figures. Individually owned life insurance is disregarded only when total face value across all policies is $1,500 or less; above that, cash surrender value counts as a resource.
An irrevocable trust’s ownership changes that analysis significantly, and the treatment depends on the trust’s terms, its funding date, and the look-back rules. Do not extend consumer-level Medicaid summaries to a trust-owned policy without counsel. Ohio also has a filial-support statute on the books at R.C. 2919.21 addressing nonsupport, which occasionally surfaces in family conversations; verify how it is actually applied in 2026 before it appears in any communication from the trust department.
The Candidate Screen and Realistic Ranges
Screen before you escalate. Insured roughly age 70 or older, or any age with a material adverse change in health since issue. Death benefit of $100,000 or more. Policy type permanent, guaranteed universal life, or convertible term inside its conversion window. Non-convertible term and small final-expense policies generally do not qualify, and a policy already on a nonforfeiture option or in a grace period needs immediate attention rather than an annual-cycle review.
On value, use the published range and nothing else. The GAO’s market study (GAO-10-775) found sellers typically received roughly 10 to 35 percent of face value, on average about four to eight times the cash surrender value. Those are historical market ranges rather than expected outcomes for any particular contract; the result depends on the insured’s age and health, the premium load required to maintain the policy, and the carrier. A committee memo that presents ranges as projections is a document you will have to explain later.
How a Referral Works
Once authority is confirmed, you send the policy cover page and nothing else. The screen is free, carries no obligation for the trust department or the trust, and typically returns within one to two business days. If you want an indicative range for the file or a committee presentation, four documents move it forward: the cover page, a current in-force illustration run at guaranteed and current assumptions, the most recent carrier statement, and a signed HIPAA authorization for life expectancy underwriting.
A standard file runs roughly 60 to 120 days from application through funding, with proceeds held in independent escrow and released when the carrier confirms the ownership change. The trustee remains the decision-maker throughout and can stop before signing a purchase agreement. Whether the outcome is a sale, a restructure, or a decision to keep paying premiums, the file now contains the comparison a prudent-investor record is supposed to show.
Educational Only
This page is educational and is not legal, tax, or investment advice to you, the trust, or any beneficiary. Ohio Trust Code provisions, case law, Medicaid figures, and insurance regulations change; verify current authority and obtain independent counsel before acting. Pine Lake Life Solutions provides a free policy review and works with policies of $100,000 or more in death benefit, typically paying more than cash surrender value. Send the policy cover page or call (305) 209-7183; see the Education Center for background material.
Frequently Asked Questions
Does an Ohio trustee have to consider selling a trust-owned policy?
No Ohio statute names life settlements, but prudent investor duties under R.C. Chapter 5809 require managing trust property with reasonable care, and a policy is trust property. The exposure arises when a trustee surrenders or lapses coverage without documenting what the alternative would have produced.
What authority do I need before testing the market?
Confirm that the instrument grants power to sell trust assets, including insurance, and check for retain-the-policy language, insurance-trustee carve-outs, or directed-trust provisions. Then address notice and consent under the Ohio Trust Code’s provisions in R.C. Chapter 5810, or seek court instruction where appropriate.
Why is the carrier’s annual statement not sufficient?
It reports past values rather than projected sustainability. A current in-force illustration run at both guaranteed and current assumptions is what reveals a universal life contract heading toward an early maturity date, which is the classic silent failure in trust-owned insurance.
Are settlement proceeds a distribution to beneficiaries?
No. A settlement is a sale of trust property, so the proceeds remain trust assets subject to the instrument’s dispositive terms and the trustee’s investment duties. How and when beneficiaries receive anything is governed by the trust, not by the transaction.
How does Ohio regulate the transaction?
Ohio Rev. Code Chapter 3916, the state’s viatical settlement law, is administered by the Ohio Department of Insurance and covers provider and broker licensing, disclosures, contract requirements, and anti-STOLI rules. Confirm the current text and any 2026 amendments with the Department.
Which trust-owned policies are worth screening?
Insured roughly age 70 or older, or any age with a material adverse health change since issue; death benefit of $100,000 or more; and permanent, guaranteed universal life, or convertible term coverage. A policy already in a grace period or on a nonforfeiture option needs attention immediately, not at the next annual cycle.
What should a committee memo say about expected value?
Present the GAO-10-775 findings as historical market ranges — roughly 10 to 35 percent of face value, averaging about four to eight times cash surrender value — and state explicitly that they are not projections. Any specific figure requires underwriting of age, health, premium load, and carrier.
What does a review cost the trust?
Nothing. The policy review is free and creates no obligation for the trust department or the trust, and no ownership changes unless the trustee signs a purchase agreement. The initial screen on a cover page typically returns in one to two business days.
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Related Reading
- Life Settlement Vs Surrender
- Cash Surrender Value Life Insurance
- What Policies Qualify For Life Settlement
- Life Settlement Licensing Ohio
- Life Settlement Taxes Ohio
- How It Works Policy Options
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.