Estate Planning

One underutilized tool in the wealth transfer process is the survivorship life insurance plan.  Often referred to as second-to-die insurance, survivorship life provides clients with an economical solution for covering costs associated with asset transfer and settlement fees at the time of death.  These costs can include those associated with transferring property to heirs, state inheritance taxes on estates, probate, administrative fees, unpaid taxes, funeral costs, unreimbursed medical expenses and more.

Unlike traditional life insurance, the death benefit featured in a survivorship policy isn't paid out until the second insured dies.  Since the premium is based on joint life expectancy of the insureds, survivorship life insurance is usually less expensive per thousand dollar of death benefits than traditional single-insured insurance.  Additionally, since the death benefit isn't paid until after the second death, the insurance company is less concerned is one of the two individuals is not in ideal health.  Many carriers will issue this type of policy even if one person is uninsurable.  Of course, each carrier has their own definition of "uninsurable" and for clients of older ages, the carrier may require that the insurable person's health be no worse than the standard or a low table rating.

Obviously tax planning is an integral part of the overall process, but the value that a properly designed estate plan brings to clients is not measured in tax benefits alone.  Estate creation and preservation is often the most important overriding concern of clients.  A survivorship life insurance policy can accomplish both goals.

In many business situations, one child of the owner is active in the business while one or more of the owner's other children are not.  In these instances, the business is often left to the child who is involved in the day-to-day operations.  But what about the other children?  Should a business owner expect the involved child to provide them with income from the business?  A life insurance policy naming the other children as beneficiaries is a useful tool in equalizing the inheritance.

Even though federal estate tax is not an issue for the majority, 21 states and Washington, D.C. currently have their own estate or inheritance taxes in place for 2011.  The exempt amounts allowed by these states vary from $0 to $5 million with $1 million being the average.  With many states experiencing financial distress, it seems logical that more states may seize the opportunity to generate revenue by decoupling from the federal estate tax and adopting a state estate tax.

Survivorship policies generally insure married couples.  However they can be designed to insure business partners protecting families against their premature death, or to provide an efficient wealth transfer vehicle from parent to child.  The more you know!!


Tom