For married couples with large estates, second-to-die life insurance (sometimes called “survivorship insurance” or “dual-life insurance”) can be a useful tool for providing liquidity to pay estate taxes. This type of policy pays off when the surviving spouse dies. Because a properly structured estate plan can defer all estate taxes on the first spouse’s death, some families may find they don’t need any life insurance proceeds at that time. But significant estate taxes may be due on the second spouse’s death, and a second-to-die policy can be the perfect vehicle for providing cash to pay the taxes.
A second-to-die policy has a couple of key advantages over insurance on a single life. First, premiums are lower. Second, generally an uninsurable person can be covered if the other person is insurable.
But a second-to-die policy might not fit in your current irrevocable life insurance trust (ILIT), which is probably designed for a single-life policy. To ensure that the proceeds aren’t taxed in either your estate or your spouse’s, set up a new ILIT as policy owner and beneficiary.
Determining whether a second-to-die insurance policy is right for your situation requires a review of your personal circumstances. Contact us if you have questions regarding life insurance.