A second-to-die life
insurance policy, or survivorship life as it's
sometimes called, insures two lives - a husband and
wife usually or business partners. However, the
death benefit isn't paid out until the second
insured person dies.
Usually, the death benefit from a second-to-die
life insurance policy is intended to go to the
children , a charity or pay taxes owed after both
spouses pass away.
In the U.S. there is a marital deduction
permitting you to leave an unlimited amount of
assets to your surviving spouse with no taxes
payable at your death. Those assets then become part
of the estate of the spouse and if it includes a
second to die life insurance polciy it could help
pay any taxes. In Canada, there is more lenient tax
treatment.
There are also tax ramifications for small
businesses, which is why business partners also
purchase second-to-die policies.
THE REASON TO BUY SECOND TO DIE LIFE INSURANCE
POLICIES
With a second-to-die life insurance policy your
beneficiaries can pay debts with the proceeds of
your policy, so they won't be forced to sell your
house or liquidate assets to pay the bill.
A second-to-die life insurance policy can help to
construct a financial plan reducing the tax burden
of wealthy individuals by creating trusts and using
second-to-die life insurance as part of the
estate-planning process.
ADVANTAGES TO SECOND TO DIE LIFE INSURANCE
POLICIES
1. Less expensive. Second-to-die life insurance
is usually less expensive than life insurance but
depends on the blend of the ages. The premium is
based upon the joint life expectancy.
2. Estate Preservation. A second-to-die policy
appeals to individuals who feel strongly about
preserving their estates with the life insurance
paying the taxes.
3. Easier to buy. It's easier to qualify for a
second-to-die policy than for individual life
insurance. Since both insureds must die before the
benefit is payable, the insurance company is less
concerned that one of them might not be in good
health.
* Builds your estate. In some cases,
second-to-die life insurance is marketed as a way to
build an estate, not just insulate it from taxes.
Much like individual life insurance, the death
benefit of a second-to-die policy can ensure that
certain people receive money, even if you spend
every nickel.
4. Second-to-die life insurance might make sense
for people who don't have a lot of money but want to
leave an estate for their children.
