Survivorship Life Insurance Policies
Survivorship Life Insurance Policies
In estate planning, you have many tools available. If you have considerable income and assets that you want to leave to your heirs, then you must plan carefully to ensure that your beneficiaries receive the full benefit of their inheritance. Survivorship life insurance is a type of policy that can assist in making in easier to distribute your estate as well as manage the taxes involved in passing your legacy to future generations. Survivorship insurance is a policy that covers two people and does not pay out until both people die. An example of this would be children who did not get the death payout until both of their parents passed away.
The strategy involved in mitigating the estate taxes associated with passing money to beneficiaries generally involves investing money into the life insurance that beneficiaries can use to replace money used to pay taxes. The reason why it involves two spouses is because of the fact that spouses are able to inherit an estate tax free. In a will, the children may be given the maximum amount of tax free assets and the rest passed onto the spouse. Then when the spouse passes away, the rest of the assets are given to the children who can then use the death benefits received from the insurance policy to pay for the taxes.
However, survivorship life insurance isn't just for the rich. Parents of special needs children can also use these policies to set up a trust for their child that provides them with enough money for their care after the second parent dies. This is particularly important if there is no or very little family support available for the child. In addition to this type of insurance, parents of special needs children may also want to consider getting a regular whole or term life policy that also replaces the income lost upon their death.
Since two people are insured, the cost of the plan tends to be less than if each person were to get their own plan. Additionally, a person who may have been denied for their own plan due to the inability to pass a medical exam may be approved on a survivorship insurance product. Generally, this will be looked at on a case by case basis. Like other life insurance products, the money invested in this product is tax deferred. It is certainly worth investigating this option if you have a special needs child or you have substantial assets to pass along to the next generation
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