Also referred to as second-to-die or last-to-die policies, survivorship life insurance is a single policy that protects two individuals and pays the death benefit upon the death of the second insured. Ordinarily, both people are spouses.
Unlike regular, “traditional” life insurance coverage, a survivorship life insurance policy – which can also be referred to as joint survivor life, or second to die life insurance – will not pay out its death benefit until the passing of the second insured. This differs from regular life insurance in that the surviving partner won’t receive any benefits (at least from the survivorship life insurance policy) when his or her spouse dies. Therefore, if there will be a need for the surviving spouse to have liquidity, then it is important to have other coverage in place.
When parents purchase a survivorship life insurance policy, they are typically thinking about their children and/or other heirs (as versus themselves). For instance, the proceeds from this type of policy could be used for paying estate taxes – which could eliminate the need to sell assets and/or to drain savings in order to come up with the needed amount. (However, for the proceeds of the survivorship life insurance policy to not be included in the insured’s estate, the policy will need to be owed in an irrevocable life insurance trust, or ILIT).
It is important to note that, while a survivorship life insurance policy can be an effective tool for estate planning.
s Survivorship Life Insurance the Right Type of Coverage for You?
Although it is not right for everyone, there are some instances where a survivorship life insurance policy would be a viable option. For example, estate planners frequently use this type of coverage in order to help lessen the estate tax burden of wealthy couples.
Because the unlimited marital deduction allows assets to pass tax-free from one spouse to another, the real issue oftentimes comes at the death of the second spouse. In this case, a survivorship life insurance policy can essentially delay the benefit payout until the cash is needed for such taxes.
These policies can also be an option for business partners and/or couples who are concerned about providing for a special needs child or other related obligation. Here, too, the benefit is that these policies will pay out funds for estate tax obligations so that the family’s other assets don’t have to be sold and/or savings drained.
Read more: https://www.mintcofinancial.com/best-survivorship-life-insurance-in-florida/
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