A couple’s best-laid plans to pass down assets such as real estate, businesses, investments or art work could easily go awry if the children have to sell off that stuff at fire-sale prices because Mom and Dad failed to set aside enough cash to pay the estate taxes.~ Jay MacDonald, Bankrate.com
Turn that thought into a question. How do we protect our children from estate taxes that may consume most of what we want to give them as an inheritance? The answer might be Survivorship Life Insurance.
Also known as second-to-die insurance, this policy covers two people and only pays benefits when the second person dies. Financial planners have found this to be helpful for wealthy couples or business partners. According to Bankrate.com contributor Jay MacDonald, “The purpose is always essentially the same: to provide the cash to pay anticipated estate taxes on an illiquid estate so the assets don’t have to be sold off piecemeal or at an inopportune time.”
Besides its positive impact on taxes several other advantages of survivorship policies exist, but especially pertaining to underwriting. If one person of the two being insured has major health issues, the underwriter can still issue a policy. Underwriters also may follow a “more lenient mortality table” when insuring two. These plusses, coupled with the fact that survivorship policies don’t dispense benefits until the second partner dies, usually leads to lower premiums.
Jonathan Bauer, a lawyer specializing in estates, shares that some young couples are now seeking these policies to assist with support of their children in case of a catastrophe. This is found to be especially true if one partner “has a medical condition that makes life insurance really expensive, it’s a cheaper alternative than even individual term policies,” he says.
Purchasing the best Survivorship Life Insurance policy is complex. It is important to work with a professional financial planner. He or she should help craft a “comprehensive estate plan.” Part of that might include survivorship life insurance. Financial experts will provide the legal intelligence to help protect your money, “[maximize] the tax advantages,” and give the foundation to give beneficiaries the best outcome. Contact Cary Stamp and Company, one of Palm Beaches premiere financial planning firms for more information.
Neither Cary Stamp & Company nor Commonwealth Financial Network® provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.