One of the first things that you will want to do after creating your TOLI is open a trust checking account, which is a checking account that is opened under the name of your TOLI. The trustee of your TOLI will be the one that is in charge of this checking account. As it applies to a trust owned life insurance trust, this account will need to be funded by the settlor/grantor (which is typically the insured person named in the insurance policy that the TOLI holds/will hold) of the TOLI, and the trustee will use those funds to pay the insurance premiums and other expenses required/allowed to be paid as directed in the trust document.
Opening a Trust Bank Account
As it pertains to TOLIs (or trust-owned life insurance), the trustee should be the one opening up the trust bank account. In order to open a trust bank account, the trustee will typically need to provide the bank with two forms of identification, the signed original TOLI (or trust) document, a list of the TOLI’s beneficiaries, and an tax-identification number. You can get a tax-identification number for free online through the IRS website.
Funding the TOLI
Generally, there are two ways to fund a TOLI: with small periodic gifts, or through a large deposit. Smaller periodic gifts are recommended in order to take advantage of gift tax exclusions, which renew each year. However, it is also possible to transfer assets to the TOLI that produce income, and allowing the trustee to make premium payments with that income.
TOLI L.C. can do all this work for you through its trustee services, or as a one-time matter by filing a request with the IRS for an employee-identification number and opening a trust bank account with your relevant documents.
