Life Insurance can be a helpful tool for estate planning.
Survivorship Life Insurance
The Economic Recovery Act of 1981 allowed for the postponement of estate taxes until the death of both husband and wife. While this provides couples with increased flexibility during their lifetime, in many cases it places a substantial tax burden on the combined estate when the surviving spouse dies.
Survivorship life insurance helps alleviate this problem. Unlike traditional life insurance, which provides protection on the life of a single insured, survivorship life covers two individuals with proceeds payable upon the second death.
A trust is created when a person (trustor) transfers assets to another person (trustee) to be held for the benefit of themselves or their family. When a trust is creating while the trustor is still alive, it is considered a living trust. It becomes a revocable living trust when the trustor reserves the right to dissolve the trust.
Life Insurance proceeds can be made payable to your trust by making the trust the beneficiary of your Life Insurance policy. And since a trust can collect life insurance proceeds immediately after the trustor’s death, your family does not need to wait for court approval to begin to receive the benefits.
Please see your tax advisor for additional information on estate planning.