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As you and your partner cruise out into your golden years, the last thing you want to worry about is estate planning. You’re interested in keeping busy living life to the fullest and enjoying your newfound wealth of post-retirement free time, but you also want to be sure you’ve found the right life insurance policy to help your loved ones after you’ve passed. With traditional life insurance, both you and your partner would need individual coverage. However, a survivorship insurance plan covers two people and isn’t paid out until after both parties have died, meaning a larger inheritance for your heirs and a more affordable premium for you and your spouse. Here’s a handy list of everything you need to know before pursuing a survivorship insurance policy.
How Does It Work?
Survivorship policies work as a type of joint life insurance, covering multiple people – primarily spouses – for the duration of both parties’ lives. Unlike “first-to-die” plans, these are known as “second-to-die” policies, meaning that the payout is not made until all members of the plan have died. These joint plans differ from traditional term insurance plans in both payout and the general cost, as survivorship plans are generally cheaper for the participant. Rather than having to pay separate premiums on individual life insurance coverage, a married couple can simplify the payment process by only holding one single policy.
Who Should Consider It?
Although your licensed life insurance professional or financial advisor will be able to guide you in a final decision on your plan, there are a few standout reasons for a couple to consider a survivorship life insurance policy. Primarily, these plans are reserved for those with a spouse or life partner with whom they’d like to share coverage. The following are scenarios in which a couple may want to pursue a joint agreement.
- When Multiple Policies are Too Expensive
Much like rolling back to owning only one car, a single, joint policy can cost considerably less than separate plans for a married couple. However, policy payment rates differ based on lifestyle, company, and personal needs. If saving money is the name of your game, check with your team to ensure you’ve got the most affordable plan possible.
- When Your Spouse is Declined Coverage
It’s not uncommon to find one spouse caring for another in times of sickness or declining health. If you or your spouse have been turned down coverage on a singular policy, it might make more sense to pursue a survivorship plan and include your spouse. Additionally, these policies have flexibility in terms of structure. Because the actual payout doesn’t occur until death, there are built-in options to allow a spouse to take out built up value. This is especially helpful for those caring for a disabled or terminally ill loved one.
- When You Want the Best for Your Heirs
A survivorship policy is intended to insulate your inheritance from estate taxes once both you and your partner have passed. Beginning in 2018 a couple can exclude $22 million, $11 million each from federal estate taxes. Although it is unknown at this time what effect this may have on your continued need for your coverage, you should look to the life settlement industry as an alternative to surrendering or canceling your policy.
Combined with Life Settlements
Even if you already have an existing personal life insurance policy, a transition to a joint survivorship plan is still very achievable. By seeking out a life settlement, you’ll be able to cash in on your existing plan and then purchase the shared policy. Your settlement dollars can be used to create a nest egg or even a modest investment portfolio. That way you and your partner will be able to enjoy the spoils of extra on-hand cash while remaining confident your heirs will receive your inheritance untaxed and in its entirety.
Navigating the world of life insurance policies can feel overwhelming, and it’s certainly not something we like to think about, particularly in such specifics. That’s exactly why the experts at Life Settlement Advisors are here to help. We can lay out specifically the benefits of a life settlement and keep your estate fully intact for your loved ones. Don’t waste another moment in uncertainty; call LSA today.
Case Study:
Ann had been a widow for 10 years. She and her husband purchased a joint survivorship (second to die) policy prior to his death. The premiums have become quite expensive and Ann no longer had a federal estate tax problem. Ann decided to sell her policy for $375,000 and distributed the funds to her children.
Leo LaGrotte
llagrotte@lsa-llc.com
317-863-5936
