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The Problem: Deferred Estate Tax
Build-Up
The Economic Recovery Tax Act of 1981 allowed postponement
of estate taxes – through the Unlimited Marital
Deduction – until after the death of both husband
and wife. While this provides couples with increased
flexibility during lifetime, in many cases it places
a substantial tax burden on the combined estate when
the surviving spouse dies.
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| Survivorship Life Insurance
provides protection for two lives and alleviate
the tax burden left on the estate when the
surviving spouse dies. |
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The Survivorship Life Solution
Unlike traditional life insurance, which provides protection
on the life of a single insured, survivorship life covers
two lives with proceeds payable at the second death. As
such, it is perfectly suited to deal with the problem
discussed above.
Ownership Arrangements
Third party ownership (adult children or an Irrevocable
Life Insurance Trust) is often desirable for persons with
potential estate tax problems. The policy may sometimes
be transferred out of the estate after the first insured
dies. If the survivor lives three years after the gift,
the full face amount should be out of his or her estate.
Questions of ownership should be discussed with an attorney.
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| Key Person Life Insurance
is another use for Survivorship Life Insurance.
Key Person Life Insurance finances the business
upon the death of a key employee with tax-free
proceeds so that the company can afford to
continue operating. |
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