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  • Survivorship insurance lessens blow of estate taxes
  • May 21, 2010
  • survivorship life insurance

    Previously, the tax exemption limit was $1 million. Amounts after $1 million were taxed based on a sliding scale that gave 45 percent of a larger estate’s value to Uncle Sam.

    Ashe and Boot agree that rates for survivor-ship life insurance are cheaper and the age and health requirements make it easier to buy than traditional life insurance.

    “A $2 million survivor-ship life insurance policy –depending on age and health of the couple—is substantially cheaper than a traditional $1 million-policy for each person,” Boot says.

    Because life insurance companies won’t pay out until the second spouse dies, underwriting requirements are more liberal, allowing the health and age of both spouses to be considered, Boot added.

    Survivorship policies can routinely be converted to single, traditional life insurance policies for couples that divorce, Ashe says.

    Although people with large estates generally use survivor-ship life insurance, Chris Anderson, a spokeswoman for insurer Country Financial, says it is an attractive product for parents with special needs children.

    The proceeds from the insurance can be used to establish a trust to guarantee the child gets adequate care once the last parent dies, she says.

    Parents who want to see the family business continue also use survivorship insurance.

    “This helps ease the transition of business ownership from one generation to the next,” Anderson says.

    And for the other children who have no interest in continuing in the family business, a survivorship policy could be used to provide some cash to equalize the inheritance, Ashe comments.

     

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