How Are Survivorship Life Insurance Policies Helpful In Estate Planning?
Having a detailed plan for the future is crucial, especially when it relates to protecting your assets and valued loved ones. Survivorship life insurance policies can play an important role in estate planning by covering estate taxes, offering liquidity for estate expenses, and providing long-term financial security.
What Is Survivorship Life Insurance?
Also referred to as second-to-die insurance, survivorship life insurance is a type of policy that will cover two individuals, typically spouses. This policy pays out only after both insured individuals pass away. Most spouses see this as an essential component of estate planning.
Survivorship Life Insurance Vs Typical Life Insurance
Traditional life insurance policies will pay a death benefit following the passing of a single insured individual. Survivorship policies, however, will only pay the death benefit once both policyholders have passed away. This policy structure allows for a lower premium when compared to two separate and more common life insurance policies.
What Are The Benefits Of Survivorship Life Insurance?
Here are a few of the benefits associated with this insurance type related to estate planning:
- Affordable Policy: Survivorship plans are quite cost effective when compared to other life insurance policies.
- Covers Estate Taxes: This insurance will provide liquidity for estate taxes, which ensures heirs do not have to sell off any assets to cover fees.
- Special Needs Planning: A survivorship policy can fund a trust for a dependent with special needs to ensure financial security for the long term.
Why Consider Survivorship Life Insurance For Estate Planning?
The estate planning process involves structuring assets in order to minimize taxes and ensure the smooth transfer of wealth. Survivorship policies play a critical role by helping beneficiaries cover estate taxes upon inheritance. This policy can also provide liquid assets for estate-related costs and preserve more of the estate’s value.
This insurance type can also provide liquidity for expenses like legal fees, probate costs, and debts. This can ensure a smooth asset distribution for the heirs.
Estate Planning Strategies With Survivorship Life Insurance
Incorporating this insurance type into your estate plan can be quite an effective strategy for minimizing estate tax burdens and preserving wealth. Federal estate taxes and state estate taxes can ultimately reduce the portion of an estate that’s passed on to heirs.
Survivorship life insurance can help cover estate taxes, so a taxable estate does not diminish the intended inheritance.
Who Should Consider Survivorship Life Insurance Policies?
The following individuals typically consider survivorship life insurance plans:
- Wealthy Individuals: This policy can help protect assets from federal estate taxes.
- Business Owners: This policy can facilitate business succession plans.
- Parents Of Dependents With Special Needs: This can provide dependents with long-term financial security.
How To Choose The Best Survivorship Policy For You
There are several forms of insurance policies that can be helpful in the estate planning process. It is crucial to thoroughly evaluate death benefits, premiums, and policy structure when choosing the right plan for each individual. When you are ready to begin your estate plan, contact the experienced team at Ogborne Law today!
Source:
- Understanding Survivorship Life Insurance Policies For Estate Planning Needs Retrieved on March 24, 2025 from https://mtelderlaw.com/understanding-survivorship-life-insurance-policies-for-estate-planning-needs/
Estate Planning
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