Estate Tax Liability And Life Insurance

Individuals with a large estate and heirs are the ones most often interested in second-to-die life insurance policies. These types of policies, often called survivorship policies, combine two individuals on one policy, usually a husband and wife. If you purchase this life insurance you likely have the following circumstances:

• A spouse that will not require additional financial support after you pass on
• An estate that you would like to leave to your children without the burden of taxes

The main reason a second to die policy is purchased is for paying estate taxes. When you transfer property to another person, the government requires taxes to be paid on that property. Many do not want to leave the huge tax bill on the shoulders of their children. Sometimes children are forced to sell a home because the estate taxes are too much for them to handle financially. In the interest of leaving an inheritance to your heirs, survivorship policies may work for you. It is always a good idea to consider buying two separate policies and whether that would work out better for your financial situation.

Sources

1. Second to Die. Retrieved May 8, 2008, from http://www.statefarm.com/insurance/life_annuity/life/second.asp