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August 02, 2011 at 08:00 PM
There are a few modern uses of survivorship life that producers may not have considered, and they may be the keys to getting prospects off the fence. Consider these 5 uses for the product:
Estate equalization. When the lion’s share of the family estate is wrapped up in the family business, it’s difficult — if not impossible — to pass the estate to the children interested in running the business without disinheriting a child outside the business. You can include the child who’s outside of the business by using survivorship life insurance.
Special needs trust. With a trust as the beneficiary, survivorship life can ensure financial security for a disabled child while ensuring his or her continued eligibility for governmental programs.
Retirement accounts. Retirement accounts make great wealth accumulation tools but poor wealth transfer tools. Such accounts are subjected to various taxes at death before the beneficiaries see a dime. With survivorship life insurance, under a concept called wealth transfer, retirement assets can be withdrawn during life and used to fund premiums to generate tax-free proceeds of a life insurance policy. The beneficiaries are the same people who would have received the retirement assets directly, but now they are tax free.
Uninsurable dilemmas. What about a couple with one uninsurable? A person may be uninsurable but need to take out meaningful life insurance, perhaps for estate liquidity purposes. At some companies, as long as the uninsurable is an “acceptable” uninsurable (life expectancy of one year or more), then both can obtain survivorship life insurance, provided the other insurable is Table 6 or better.
Education. With the rising cost of education, many grandparents are contributing toward their grandchildren’s educations. If mom and dad die early, the full cost may be born by the grandparents. Survivorship life can ensure that if the grandparents aren’t alive to see the grandchildren go through college, an education fund will be available.
