The day-to-day operations of the Trust are managed by the Trustee. He functions much like the Chief Executive Officer of a normal company. Although he makes all decisions regarding the Trust, he does not do so in a vacuum. His decisions are reviewed and approved by a Governing Trust Board and he regularly consults with them prior to making any important decision. Four of the five Board members are investors just like you. Their thinking, and that of the Trustee, is driven first and foremost by what is in the best interest of investors and how the most money can be returned to the investors. They stand to lose and gain just as much as you.
The legal affairs of the Trust are handled mostly by people at the Dallas law firm, Quilling Selander Lownds Winslett & Moser P.C. Although the Trustee is the founder and a shareholder of the law firm, he does not generally handle the legal affairs. Instead, those matters are handled by Linda LaRue and Josh Shepherd each of whom are shareholders in the firm. Two paralegals at the firm, Cheryl Morris and Leslie Lincoln, spend the vast majority of their time responding to investor questions and resolving disputes. Communication by investors with them costs the Trust money each year which reduces the amount of money available to distribute to investors. Accordingly, the Board and the Trustee urge you to try to limit your calls and emails to them which will increase the amount distributed to you. Hopefully, this website will help in that regard.
From time to time, the Trust also employs the services of Tom Herbelin of the Herbelin Law Firm in Dallas to represent it in connection with the filings the Trust has to make with the SEC. Mr. Herbelin is an expert in the securities field and he oversees the proper filing of documents with the SEC.
The internal accounting affairs of the Trust are handled by its Chief Financial Officer, Nauman Poonja, and its Chief Accounting Officer, Natalie Eilat. Each of them are CPAs and they are located in Dallas. They keep the internal books and records of the Trust and prepare the financial information contained in the SEC filings. They coordinate communications with the Trust’s outside audit firm, Plante Moran, and participate in the audit process. They also coordinate the preparation of the tax returns and issuance of tax forms to investors with the Trust’s outside accounting firm, Armanino, which the Trust uses for tax-related services. Prior to Natalie and Nauman joining the staff of the Trust, Armanino handled virtually all accounting and tax matters relating to the Trust since its inception. Armanino is a national accounting firm with offices in Dallas. Plante Moran is our audit firm based in Southfield, Michigan and they provide audit services for the Trust incident to the filings with the SEC. They have served as the auditors for the Trust since its inception in 2016.
At the inception of the Trust, Magna Servicing in Waco was the servicer of the Trust’s insurance policies and prior to 2019 also served as the portfolio manager. After Mr. Quilling was appointed as Trustee, he hired NorthStar Capital to take over the portfolio management aspect. NorthStar is a leader in the industry and was able to immediately optimize the premium streams on the policies resulting in savings and deferment of millions of dollars in premium obligations of the Trust. Effective November 1, 2020, NorthStar took over the servicing aspect, and the Trust has seen vast improvement in communication with investors. NorthStar has offices in Atlanta, GA, Irvine, CA and Waco, TX. The Trustee hopes that you will be very pleased with the change. Magna Servicing is no longer involved with investor services. Please do not try to contact them.
The Trust employs the Dallas actuarial firm of Lewis & Ellis to prepare models as to when insureds are likely to die. As referenced below these tables are extremely complex and are based on mortality tables issued by the Society of Actuaries. The reports produced by Lewis & Ellis are used to value the insurance policies owned by the Trust and in the preparation of budgets.
The Trust has a relationship established by the Bankruptcy Court with Advance Trust & Life Escrow Services, LTA (ATLES) in Waco, Texas. ATLES is a trust company regulated by the Texas Department of Banking and acts as the securities intermediary for the Trust. What that means is that the insurance policies are owned by and are in the name of ATLES, as custodian for the Trust. ATLES holds the policies in trust for the benefit of the Trust which is entitled to all funds for death proceeds under the policies. The day-to-day operations of ATLES are run by its President, Brandon Gilliam. In addition to holding the policies, ATLES receives the funds paid out by the insurance companies when death claims are submitted. At the end of each month, all of the funds are turned over to the Trust for further disbursement to CFHs.
More information regarding the individuals and companies mentioned above can be found by clicking here and in the About Us section of the website.
The Finances of the Trust
The only source of revenue for the Trust is the money it gets from the insurance proceeds when a person dies. No one knows with any accuracy when a person will die or when the proceeds will be received so it is extremely hard to budget for these things. About the only thing that can be done is to project a certain amount each month and hope that it becomes reasonably accurate. The Trust projections are based upon tables prepared by the actuaries used by the Trust, Lewis & Ellis. These projections are called stochastic analyses and are extremely complex. They are based in part upon mortality tables published by the Society of Actuaries. Even so, and although they are based on sound statistics, the projections remain largely a guess and a hope. For the first couple of years of the Trust the projections did not hold true, but they were reasonably close. In 2019 and 2020, the Trust exceeded the projections which is one of the reasons the Trust was able to make a distribution to all of you. For calendar year 2021, the stochastic analysis projects that there will be $178,538,781 in maturities (death proceeds). Of the total amount, $114,776,436 belongs to the Trust and $63,762,344 belongs to CFHs.
Regardless of whether the Trust receives the projected death benefits each month it still has to pay its expenses. By far the biggest expense per month is the premiums. Now that NorthStar has optimized the premiums for each policy the amount needed each month can be calculated very closely. The amount paid by the Trust comes out of the death proceeds from prior months. The total amount of premiums due for 2021 that the Trust has to pay is approximately $65,428,423 which amounts to about $5,452,368 per month. This is the share the Trust must pay and does not include the separate amount paid by the people who hold CFH positions. If you include the amount paid out of funds contributed by the holders of CFH positions, the monthly premium obligation is approximately $8,358,367 per month.
On top of the amount paid for premiums, the Trust also has to pay the operating costs of the Trust which means the lawyers, accountants, servicer and other professionals mentioned above. That amounts to about $1,105,330 per month. So, if the revenue projections do not hold true it becomes harder to pay premiums and expenses. Fortunately, most months the Trust makes some money above and beyond the required expenses and so the Trustee puts that money in interest-bearing accounts and builds it up over time to be used to pay a distribution to each of you.
In addition to the operating costs outlined above, the Trust also has to pay interest and principal payments related to the New IRA Notes, and those amounts fluctuate each year.
All of the financial records of the Trust are reconciled each month and each year they are audited by our outside auditors. All important financial information is reconciled and reported in our quarterly filings with the SEC.
Hopefully, you can see that it is virtually impossible for the Trustee to tell you when during the calendar year there will be enough money built up to make a distribution or how much the amount will be. Rest assured, however, that building cash sufficient to make a distribution, after setting aside sufficient reserves to operate the Trust and pay premiums, is a daily focus of the Trustee and the Governing Trust Board.