When it comes to survivorship life, many in our industry are fixated on the federal estate tax: Will it or won’t it be eliminated for good? Will it sunset and then return? This “boomerang tax” may come and go and continue to be a political football forever, so the only thing we know is that we don’t know what will happen on the federal level. Many are coming to the conclusion the so-called death tax is never going to go away completely, and its relevance as a deal maker or breaker is becoming irrelevant for a number of reasons.
Demographically, we’re going to have a slew of older Americans who need survivorship life for many reasons other than the federal tax. By 2035, the number of over-70s in the U.S. will more than double from 26 million today to 57 million. Even the best “super-preferred” applicant is going to find term very expensive in his or her 90s, and initiating an individual policy at older ages (unless the goal is asset transfer) will be prohibitively expensive even with adoption of the standard mortality tables.
These aging baby boomers, written about often because of their significant estates compared to previous generations, are going to have financial planning needs that make survivorship life the product of the future. Of course, not all of these newly aged people may be in the best shape from an underwriting standpoint. The low cost of SL with the ability to have an “uninsurable” life in the equation at many companies (if the other life is above a Table 6, or so) is the ideal product at the ideal time for people who have financial planning needs beyond the ‘there it is, now it’s gone’ federal estate tax.
One of the emerging trends that ensures liquidity will be required after the second death is state inheritance taxes separate from the federal tax as a way to raise revenue.
The excerpts in this report focus on illustrated values for whole, universal and variable life survivorship products from the leading companies in the market. And while these charts are only slices of the Full Disclosure database, they will give you an idea of how these products perform on a prospective basis. The additional components in the latest edition of Full Disclosure are low-cost, long-term guarantees of premiums and death benefits in flexible-premium policies for both SUL and SVL policies. These tables provide minimum annual premiums to age 100 or beyond (lifetime) with little or no cash value at maturity.