Second-to-die insurance

(redirected from survivorship life insurance)
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Second-to-die insurance

Insurance policy that, on the death of the spouse dying last, pays a death benefit to the heirs that is designed to cover estate taxes.

Second-to-Die Insurance

An insurance policy that covers a married couple and pays the death benefit on the death of the second spouse. Generally speaking, the death benefit is intended to cover the estate tax. Because the second spouse does not owe the estate tax upon the death of the first spouse, second to die insurance helps the heirs of the married couple rather than either the husband or the wife. It is also called survivorship life insurance or dual-life insurance.
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With the advent of survivorship life insurance, the ILIT has become the most popular and important estate planning legal document, next to the last will and testament, and is generally used to solve the problems of many individuals with taxable estates.
All of these changes have shifted how survivorship life insurance is being utilized, as well as the demographic being attracted to this product.
Survivorship life insurance products have registered significant growth since 1996, according to Limra International, Windsor, Conn.
During the last few years a new type of insurance product, survivorship life insurance (SLI) or second-to-die insurance, has become an important tool for the estate planner.
It features practical planning techniques and provides many easy-to-adapt clauses, forms and checklists, including a goals and objectives questionnaire, gifts of a life estate to a spouse, irrevocable minor's trusts, survivorship life insurance trusts and standard will clauses.
In particular, if we have talked about utilizing survivorship life insurance, the need may not be as great because most of the uncertainty in planning -- at least as far as the tax issues are concerned -- has been removed.
Funding a reverse Section 303 stock redemption with survivorship life insurance can be particularly attractive when the unlimited marital deduction is used at the first death, since it provides death proceeds at the second death, when the estate taxes can no longer be deferred.
Survivorship life insurance pays a specified death benefit upon death of the second of two insureds covered by the policy.
With the continued uncertainty in the estate tax environment, the focus of survivorship life insurance has shifted from estate tax planning to legacy planning--Legacy Advantage Survivorship Universal Life is being introduced to help facilitate that shift.
Split-dollar funding survivorship life insurance payable at the second death can substantially reduce the annual gifts to the trust, thereby allowing larger amounts of insurance to be purchased within these "present interest" limits (see Survivorship Life Insurance, page 552).
Traditionally, such people use life insurance, often survivorship life insurance, to pay the tax man.