Second to die life insurance or survivorship insurance is what provides benefits to your heirs. It is especially helpful for estate planning. If you have an estate that is larger than the average estate, you should take help from a tax planning agency to get your survivorship insurance. This kind of insurance is not just for the children and grandchildren. It is also helpful for the surviving spouse in overcoming the tax hurdles that come with the passing of a loved one.
Here are a few reasons most property owners opt for survivorship insurance –
- Most investors fear to lose their money on their current investments.
- They are also aware of the tax burden that can befall their heirs after their premature and sudden death.
- They want to be able to pay for their children’s or grandchildren’s schooling and college.
- People want to leave a tax-free inheritance for their heirs.
- Policyholders usually want to pay their estate taxes and promote liquidity of the estate assets.
- Policies like the second to die often bring with them attractive tax saving opportunities for the policy owners when they are alive.
If you want a miraculous life insurance, second to die should be your policy of choice since it takes care of all six concerns.
How is second to die policy different from a life insurance policy?
People mostly use their second to die or survivorship policy to create a tax-saving estate plan. This is primarily because the policy carries the benefits forward from one generation to another after the policyholders (spouses) die. Quite contrary to general life insurance policies, the surviving partner does not receive any direct monetary benefit from the policy when one of the policyholders dies.
Why is a survivorship policy unique?
Most policy buyers also go for survivorship policy since they are worried about the fortune of their next generations and this policy covers two people at the cost of one. Buying two separate life insurance policies would cost much more than buying a survivorship policy in the current US market.
As per the Federal Laws, married couples can delay their federal estate tax payment until both of the policyholders pass away. According to this development, the surviving spouses could defer the taxes, but their heirs would have to bear the brunt of federal taxes whether they wanted to or not. This led to the development of the current survivorship policies.
How can you fund your gift taxes from your second to die policy?
Property can include cash, real estate and other forms of assets. You can transfer the title to any property by direct sale, gift, law, and contract. If you decide to transfer your property as a gift, be sure to experience a considerable reduction in the size of your estate. In such a case, you need to think ahead regarding gift tax exclusion limits and “adjustable tax gift.” You can include the excess in your estate tax calculation. This is very common in case of estate owners, who want to leave his estate intact for his/her heirs other than his/her spouse or charity.
Having a second to die policy entails a payout when the second holder passes away. Therefore, the heirs can use the death benefit from the second-to-die policy to pay the federal taxes within time. This does not create an unwanted and unexpected financial pressure on the heirs, who might otherwise decide to sell off the estate and the assets to protect themselves from economic challenges.
How are lifetime gifts the answer to estate planning challenges?
In the event of the death of an estate owner, the state intestacy laws control the distribution of the estate assets. This happens in case the person passes away without a will. This usually occurs without any regard for the owner’s wishes or heir’s circumstances. Lifetime gifts are a much smarter way to generate tax benefits to the owner and at the same time keep the property within the family. Lifetime gifts are like wills, except they give individuals the opportunity to “gift” his/her estate to the heirs. This attracts gift tax exclusions and results in the considerable reduction of all kinds of estate administration and maintenance costs.
Having a second to die insurance policy is critical for any estate planning. A second to die policy can fund a family trust, gift trusts and irrevocable trusts quite successfully upon a little help from an experienced tax planner and estate manager.