Second to Die Life Insurance policy is a life insurance policy that insures two people at the same time. The benefits are paid only after the second person dies. It is also referred to as last-do-die insurance, joint and last survivor insurance and survivorship life insurance. Since in a second to due life insurance the insurance company does not have to pay until the second person dies, the premium is lower.
A second to die life insurance policy has many uses. The most common use for a second to die life insurance is providing cash for payment of estate taxes. Since the premium is lower, it is even a better solution than a policy insuring only one person. You can also use a second to die life insurance policy to replace an asset given away. Charitable remainder trusts allow a person to sell a highly appreciated asset without paying a capital gain tax, receive an income tax deduction and convert the asset to an income. At their death, the asset passes to the charity, not to their heirs. You can avoid this and make sure your heirs get the inheritance they deserve by getting a second to die life insurance policy for the value of the asset given to charity. Sometimes premiums can be entirely paid from the income from the charitable remainder trust. The income tax deduction can be spread over six years if the asset contributed to the trust is large enough.
You can use a second to die life insurance as a powerful estate planning tool if expect to leave a significant estate to your heirs and the size of the estate will necessitate payment of a significant sum of estate taxes. Another use of a second to die life insurance is that it can be used for funding for care of special needs children: If you have children with special needs, you can ensure that will be available even after your deaths by planning ahead with this type of insurance. If you want to leave a significant sum of money to charity, you can buy this policy and name your favorite charity as the beneficiary. When a 401(k), IRA or other qualified plan is passed, for example, to the children, income tax is required upon a distribution. Most people do not realize the large potential tax on what may be their largest asset. You can use a second to die life insurance policy to offset the income tax on the distributions, the estate tax or both.
