Have you thought about what will happen to your estate’s assets after you and your spouse are gone? Buying Survivorship Life Insurance can help you preserve your estate for your kids.
As that old expression goes: “Nobody lives forever.” But about your estate? Have you thought about what will happen to your assets after you and your spouse have passed on? If you own property and a bunch of big-ticket stuff (cars, boats, motorcycles, etc.), how will you pay the taxes on these estate items, without burdening your children with the tax bill?
If you’re looking for a creative way to pay your estate taxes (and more) so your children won’t have to pay the taxes out-of-pocket themselves, you might want to consider purchasing Survivorship Life Insurance.
What is Survivorship Life Insurance?
Survivorship Life Insurance (also called a “Second-to-Die” Life Insurance) differs from traditional life insurance in one fundamental way. With a Survivorship Life policy, both you and your spouse are insured, and the policy doesn’t pay out until the second spouse passes away. The policy’s payout is generally income tax-free.
Clearly, this is not a life insurance policy that benefits you or your spouse. If you are looking to financially protect your spouse, should you…the policyholder…die ahead of schedule, you should purchasing a more traditional type of life policy, such as Term Life or Whole Life insurance.
Survivorship Life Insurance is sometimes used by well-to-do couples as a financial resource to help them pay the estate taxes on their assets. With the typical unlimited IRS marital deduction, one spouse can pass assets to the other, tax-free, and delay paying estate taxes until the second spouse dies. At that point, the policy’s death benefit can be used to pay those taxes, instead of having to liquidate the estate’s assets to satisfy any outstanding tax burden, whether it’s federal estate taxes or state inheritance taxes.
In short, with this type of policy, your children won’t have to sell the family home or pay the death taxes out of their own pocket.
What are the other advantages to having Survivorship Life Insurance?
A Survivorship Life policy offers several advantages over traditional life insurance, including:
• Less Expensive – This type of policy will cost less than purchasing two life policies.
• Return on Investment – Typically, this type of insurance will pay WAY more than the policyholders have paid for the policy.
Are there any disadvantages to buying Survivorship Life Insurance?
Yes. Remember, a Survivorship Life policy doesn’t pay out until both spouses are gone. So if the primary breadwinner dies first, the surviving spouse can’t access the policy’s death benefit, thus preventing its use as income protection for the remaining policyholder.
But as we said, Survivorship Life insurance has a much more targeted purpose than more traditional life policies. It primarily benefits a family’s children and grandchildren, and not the insured themselves. But if you’re looking to not burden your children with unpaid taxes on your estate, this is a very useful type of life insurance policy to possess.
It can also be an amazing way to augment your legacy by increasing the size of the footprint you leave behind for your family or favorite philanthropic organization. It, like all life insurance, creates dollars from pennies.
For more information on survivorship life insurance, talk to AccuQuote. We can provide quality, competitive life insurance quotes from the top-rated, brand-name insurance companies you know and trust.