Your Endowment Policy – Looking After It When You’re Gone

Now that you've set up the endowment policy to fund the future of the summer house you've bought for your offspring (or yourself, for that matter), other somewhat unwieldy questions still remain. Among them: Are your kids mature enough to make sure everything stays on the level? Are they much too busy with the rigors of their own lives and families to be burdened by this additional responsibility?

One way to take care of your kids generously into the foreseeable futureis to establish an endowment fund, usually for a vacation retreat of some sort (log cabin, summer home, winter lodge, etc). Saving enough money for the initial principle amount, such that most or all of the future expenses of such a gift will be taken care of, is often a lasting source of appreciation between parent and offspring, as well as future generations. Once the money is secured, however, there is often an important consideration that a parent must make upon establishing an endowment, and it is second only to the amount of money intended to be left behind: who will manage the endowment plan? Unless responsibility is to be given to a child or children, there are a few choices - either the bank from which you obtained the endowment policy, or an external manager (as in a trust company) independent of the endowment-assigning-company altogether. Whichever one the buyer chooses is of course dependent on the parent's confidence about the eventual fate of the endowment.

In this scenario of endowment policy management, the policy is put into the hands of a professional investment manager, specializing in trust funds. Performance is secured by the fact that the "leasing" company (the company that originally drafted the endowment policy) doesn't just give the policy away; the trust company is merely hired, and can be replaced for poor performance. This choice is often a good one for endowment fund-establishers who have reservations regarding the responsibility of their heirs, or even of the original company, if they don't actually specialize in managing endowments, just in selling them. This whole arrangement doesn't indicate that one doesn't trust those inheriting their endowment; it can also be done simply to ease the responsibility of annual management of the endowment, and all of the related investment information (stocks rising and falling, etc). In the scenario of trust-company-management, they will even take care of the associated taxes, reporting them back to the original company, which may or may not (depending on the terms of the original agreement) then forward the tax-forms to the beneficiary.

One can also simply keep the endowment policy with the original company from which it was procured. Usually in this case, however, a lot more hands-on work and management is required from the beneficiaries, who can choose amongst themselves managers for the endowment fund.