Survivorship life insurance is far more than just an insurance policy. It is also a valuable estate planning tool that will enable you to leave a lasting legacy. The central purpose of survivorship insurance is estate planning, which is basically the process of setting your financial affairs in order prior to the disposing of your estate. For most people, disposing of their estate upon death means bequeathing their wealth to a beneficiary or beneficiaries, typically heirs. Survivorship estate planning assists with this transference of wealth by minimizing estate taxes and maximizing your financial legacy.
With survivorship life insurance, the insurer does not pay a death benefit until the last surviving spouse passes away. In this way, estate taxes may be avoided until both policyholders die. Once the time arrives for your heirs to pay estate taxes, your survivorship life insurance policy can avoid or mitigate them in two ways. One, you might remove the proceeds of the policy from your estate by gifting the benefit. Two, you can place the second to die life insurance policy in the hands of a third party, such as your children or a trust. Establishing the correct policy may require consultation with an accountant or an attorney specializing in estate planning. Ultimately, a cleverly structured survivorship policy will help you maximize the net worth you leave to your beneficiary and other heirs.
You and your spouse have worked hard, probably for decades, to accumulate the wealth and possessions you currently have. In other words, youve spend a lifetime building an estate, something that you most likely would like to preserve and pass on to your heirs. Another reason survivorship life insurance policies lend themselves well to estate planning goals is that they can help you both build and preserve your assets.
With a survivorship policy, your beneficiary or beneficiaries will receive a guaranteed minimum amount of money as the death benefit, regardless of how much money you leave at your death. That is, survivorship life insurance can help you build your estate. You can also choose certain types of second to die life insurance policies that allow you to invest a portion of your premiums in the equivalent of a money-market account, which will help the policy accrue cash value.
Additionally, survivorship estate planning also helps preserve your estate by keeping it out of the hands of the government and in your family. Your wealth will transfer intact from you to your heirs without the devastation of exorbitant estate taxes. The survivorship policy will cover all or most of the estate tax burden your children would otherwise have to shoulder.