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Budget Rates Life Insurance |
Life Insurance and Estate Planning
by Richard A. Eisenberg, CLU, ChFC
When a married couple plans their estate properly, $1,300,000 can be passed to the next generation tax free. With an estate less than this amount, life insurance can be used to create a larger estate.
Once an estate reaches $1,300,000 (eventually $2,000,000 in nine years), there is an estate tax due after a husband and wife die. This tax eventually goes up to as much as 55% of the estate being passed to the next generation.
A type of insurance called "second to die" life insurance was created to cover this type of need. Since the tax is not due until the second death, the insurance is not payable until then. The insurance is usually owned by a trust, or adult children, to keep the proceeds out of the estate.
Life insurance can also be used in a program of charitable giving, either to create a gift, or to pass to the next generation a gift given to a charity.
Term life insurance can be used for estate planning purposes, but permanent coverage is more appropriate.
Richard A. Eisenberg is a Chartered Life Underwriter and Chartered Financial Consultant. He has been in business since 1970. You may contact him at raeclu@aol.com.