Myerson Wealth

The Most Common Uses of a Joint-Life, Second-to-Die Life Insurance Policy

A Menu Change

I recently wrote a Monthly Update titled “What’s New on the Menu,” describing a new and important practice area for Myerson Wealth working with non-profit entities. To view that blog post, click hereThis information below, however, may have significantly more importance to you and your clients.

Much like many financial and technological products, life insurance products evolve. Some can be enhanced by intelligent engineering (like new, exceptionally robust Indexed Universal Life strategies specially built for tax-efficient wealth accumulation), while others disappear, because they cannot be sustained due to changes in financial realities. This piece highlights one such product.

Below you’ll find the most common uses of a joint-life, second-to-die life insurance policy. There are a number of products that can be used to adequately fund these uses, but the very best of them is about to go the way of the Dodo Bird. An A++ carrier has been marketing and selling a joint-life, second-to-die product that for some time has been “too good to be true.” Myerson Wealth predicted some time ago this product would not be sustainable given the current low-interest environment. This prediction is now a reality. The carrier has announced this product will be withdrawn on July 26, 2018, in favor of the replacement (and significantly less beneficial) product. 

For purpose of wealth transfer planning, life insurance has been the “go-to” funding product for decades. Life insurance for wealth transfer is used in multiple ways:

  • Liquidity to pay estate taxes. Notwithstanding the recent tax law change doubling (at least temporarily) the gift and estate exemption (from $5.5M for a single taxpayer or $11M for a married couple to $11.2M for a single taxpayer or $22.4M for a married couple in 2018), there are still many families who are in the “fortunate position” to pay taxes at their demise. If the estate consists of a large amount of illiquid assets, or even assets that might be subject to temporary market downturns, the use of life insurance to fund the tax is most commonly the answer.
  • To “even out” transfer of assets. In a number of cases, our clients have owned business entities where one or more of their children work in the company, while others had no interest to do so. In these cases our planning recommendations included the transfer of the company to the child(ren) working in the business, while other assets were left to the non-participating kids. Life insurance was used to even out these transfers.
  • As a non-correlated alternative asset class for wealth transfer. Life insurance can provide a guaranteed inheritance to children or grandchildren. Knowing the life insurance exists gives parents/grandparents the peace of mind to enjoy spending other assets without being anxious about leaving assets to their heirs. The life insurance asset is not correlated to the market, and as such, will usually provide a much greater return than if the assets were left in bonds, but with no risk commonly associated with higher yielding investments.

Because the best product to accomplish the actions above is about to disappear, we now have a very short window left to act. Hence, if you or your client has any interest in reviewing an illustration of this joint-life product, please do not hesitate to contact us. We would be happy to run an illustration and demonstrate why this product is so valuable.


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