How a Second-to-Die Policy Can Give You the Liquidity You Need

As if there were not already numerous things to consider when creating your estate plan, another important note to address is the issue of liquidity in your estate. The person in charge of administering your estate will likely need quick access to cash in order to pay expenses associated with the administration. One way of ensuring that there will be easily accessible liquid assets is to incorporate a life insurance policy into your estate plan. For married couples, a second-to-die policy, where the benefit is not paid until the death of the second spouse, may offer additional benefits.

How it Works

Why should you consider a second-to-die life insurance policy? Following are six reasons:

  1. Estate taxes are due nine months after the date of your death. In some cases, these taxes can be hundreds of thousands of dollars.
  2. Just because an estate is large and consists of valuable assets does not mean that there is cash on hand. For example, you may own a home in Anaheim that is worth $5 million. That asset must be sold or refinanced in order to access its value.
  3. Failing to create an estate plan that includes liquidity at your death can result in your assets having to be sold at deep discounts in order to gain quick access to cash.
  4. Married couples can utilize a second-to-die policy that will pay the death benefit only after both spouses are deceased. It is not until the second spouse has passed away that the estate taxes become due, making the timing ideal.
  5. In many cases, the cost of a second-to-die policy may be less expensive than a policy insuring a single life.
  6. Second-to-die policies can be held in irrevocable life insurance trusts to avoid having the proceeds included in the gross estate for purposes of calculating the estate tax that is owed.

Life insurance plays an important role in creating an effective estate plan. If you found this article helpful, why not consider sharing it with your friends and family on Facebook? It may help someone you love to create a better estate plan.

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