Survivorship life insurance policies, also
known as second-to-die life, insure two lives, with the insurance
proceeds paid after the death of the second insured. This insurance
is often used to provide financial liquidity to pay estate taxes
after the death of the second spouse. But with the repeal of the
estate tax slated for 2010, is this insurance still needed?
Until 2010, the estate tax still exists.
So unless you're positive you and your spouse won't die before
then, you may still have a need for this type of insurance. After
that, the estate tax will be eliminated in the year 2010, only
to be reinstated in 2011 based on 2001 tax laws. Further legislation
is required for permanent estate tax repeal, definitely not a
certainty at this time. Thus, if you currently own second-to-die
life insurance, you probably wouldn't want to cancel it until
these issues are resolved. Whether you need to obtain a new second-to-die
insurance policy is a more difficult decision.
Besides using these policies as a means
to fund estate taxes, you may find them to be appropriate in other
circumstances, including:
- Business owners wishing to leave the business
to one child can use the policy proceeds to provide for children
not involved in the business.
- The proceeds can be paid to a favorite
charity, so the charity receives a substantial contribution without
depriving heirs of estate assets.
- If both parents work, a second-to-die
life insurance policy can ensure minor children are adequately
provided for in the event both parents die.
The premium for a second-to-die life insurance
policy is typically less than comparable coverage on either individual
life, since only one benefit will be paid. Coverage can usually
be obtained for an uninsurable person as long as the other person
is insurable. If the policy is properly structured, the proceeds
can avoid both income and estate taxes.
Although not suitable for everyone, survivorship
life can be an attractive planning tool to meet specific needs.
[PRINTER FRIENDLY VERSION]
