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.
