Second-to-Die Insurance Solves Several Estate Planning Problems

by | Jan 4, 2023 | business planning, estate and tax planning, Estate Planning


For married couples, second-to-die life insurance can be an important problem-solving tool when it comes to estate planning. Also known as survivorship life or joint life insurance, this insurance covers two people, providing benefits to the beneficiaries only after the survivor of the two insureds dies. Parents who take out this type of insurance are usually thinking of their children, Investopedia observes.

Second-to-die insurance helps pay estate taxes
Our current tax laws enable married couples to delay federal estate taxes until both spouses pass away. However, once the second parent dies, the estate of the second spouse to die is responsible for the tax before family members receive an inheritance. The proceeds of a survivorship life policy can be used to pay taxes and estate settlement costs.

Second-to-die insurance helps heirs build estates of their own
The death benefit ensures that beneficiaries receive cash, even if they’ve been unable to accumulate assets on their own.

Second-to-die insurance preserves family assets, such as artwork and real estate, that might otherwise need to be sold to pay estate tax.

Second-to-die insurance is used to facilitate business transfers
At Geyer Law, where we help many business owners with their estate planning, we have used second-to-die life insurance with couples who have one child who is employed in the business and others who are not. While the ownership of the business is set to pass to the child who will continue to run it, the life insurance proceeds provide an inheritance to the children who are not involved in the business.

Practical advantages of second-to-die insurance
There are two very practical advantages to using second-to-die insurance: a) The premium is significantly less expensive compared to the cost of two separate policies. B) Qualifying for coverage is easier (even if one of the couple has significant health problems, as a couple they may qualify for survivorship coverage).

Second-to-die insurance is a valuable tool in a variety of estate planning situations.

– by Rebecca W. Geyer