Survivorship Life Insurance: one effective strategy
If your estate exceeds the exclusion amount, you may have an estate tax liability. However, that does not mean your heirs should lose part of your estate.

This is where Survivorship Life Insurance enters the picture. Also known as second-to-die insurance, this coverage can insure both you and your spouse under one policy, with the proceeds payable after the second death.

Survivorship Life Insurance offers a number of benefits as an estate planning tool:

·         Simplicity. Under one arrangement, you may want to establish an irrevocable life insurance trust to purchase the insurance policy, with your heirs as beneficiaries. (This keeps the insurance proceeds out of your estate for tax purposes.) By means of a will, estate assets then pass to the surviving spouse at the first death. At the second death, the insurance death benefit is paid, with the policy proceeds passing directly to the named beneficiaries. They can then use the money to replace assets lost to taxes.

·         Price. Since two lives are insured, premiums are generally lower than for two single-life policies.

·         No second guessing. There is no need to plan based on who will die first.

·         Underwriting is generally more liberal than that for a single life policy, since two lives are insured and the benefit is paid at the death of the second. A proposed insured who may have been denied life insurance coverage by a single life insurance product, may be approved for coverage by a survivorship life insurance product. Keep in mind that not every person who has been declined for coverage for a single-life policy is necessarily eligible for coverage under a survivorship life insurance policy.