Second to die insurance sounds quite morbid and somewhat counterintuitive at first glance, but it is very beneficial for those with a high-value estate or illiquid assets for their heirs. Upon the death of both policyholders, the assets rollover to the heirs without the massive burden of taxes that they would otherwise face. Second to die or survivorship life insurances are perfect for management of payment of federal estate taxes.
Survivorship policies have multiple uses and here are a few you should think about before turning away from getting your own policy.
Business agreements and management
If either the husband or the wife owns a business or both and they want to remain actively involved in the business until death. Then the sale of the business usually stays till the demise of the second owner. In such a case, the husband and the wife can meet with the prospective buyer beforehand and sign an agreement that states that the sale will take place only after the second death. To pay for the purchase of the business, the prospective buyer can get a second to die insurance policy for the husband-wife owner duo.
Funding for your child
When parents have a child with special needs, ensuring a healthy and happy life for the child becomes the primary responsibility of the parents. In the real world, a great deal of risk comes to the child after the demise of both the parents. There is an easy way out of this helpless situation. The parents can set up a special-needs trust fund, which derives the funds from the second to die insurance policy of the parents. It makes the special needs child a sole beneficiary of the trust. That means the child will receive what the trustee chooses to bequeath to the heir. The child cannot demand exclusive benefits and the assets of the trust are not the child’s assets. Therefore, the child can still qualify for government benefits and yet they cannot be liable to taxable inheritance.
A future for your child
The American dream is a far-fetched dream into reality right now. The market conditions and rising prices ensure that kids of this generation cannot do as well as their parents have in their lives. Aside from providing the children with primary education, it is time for the parents to start thinking about setting up dynasty trusts that can take care of their families. It is not just for their children. A dynasty trust can take care of their grandchildren as future generations as well. The parents can easily set up an irrevocable second to die life insurance trust funded by a last to die policy. The parents have to be the insured parties. Once they are both dead, the trustees can collect the death benefits and act as a bank for the next generations. In fact, the trustee “banks” can loan the money to the future generations for purchasing homes and starting new businesses or for educational purposes.
Education trusts: college funds and more
The modern economy is making most modern grandparents worried about the higher education of their grandchildren. While they are alive, they may try to help the parents to cover the costs, but once they are dead, there is no way to ensure that the inheritance is spent on education for their grandkids. It is entirely correct unless you establish an education trust for your grandchildren. It calls for an irrevocable life insurance trust that draws the payments from the last to die policy. The grandparents must be the insured parties, and their death will bestow the death proceeds to the grandchildren, for education expenses.
Financial security of young children
Parents of young children are afraid of dying young and living their kids with no liquid assets or no one trustworthy enough to manage the inheritance along with tax liabilities. To protect your children from this risk, you can always set up a revocable trust and bestow the responsibility of ownership of the second to die insurance policy on the trust. In the unfortunate event of the death of both parents, the trust can collect all the death proceeds, and the chosen trustee provides the benefits for the child’s daily needs.
Survivorship life insurance has more uses than one. Aside from the ones mentioned here, you can also think of it as an estate equalizer, a spendthrift trust fund, wealth replacement trust fund and a tax exemption tool. Getting one is very important for everyone, who wants to leave behind a sizable fortune for their heir(s) in the future.
About The Author:
Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA. She helps clients both personal and professional in long-term wealth building plans.During her spare time, she loves to write on Business, Finance, Marketing, Social Media.She loves to share her knowledge and Experts tips with her readers. Please visit https://www.beamalife.com/ to know more.