Second to Die Life Insurance Policies: Are They Good for Estate Planning?


Hey guys! Justin Goodbread, Financially Simple, doing
a car video here. So I had a question. “Hey! So Justin, what do you think about second-to-die
life insurance?” And this was in context of an estate planning
meeting. It was an important client, a client worth
in excess of 5 million dollars, a single individual, so we’ve got an issue with some potential
estate tax. This is a different state, and the state in
which this client lives deals with estate – an individual state estate tax as well. The client, individual, just plain up asked
me, “Justin, what do you think about permanent insurance? What do you think about this second-to-die
policy concept?” “Well, who’s gonna be the second individual?” Well, he’s got a girlfriend. Okay. I said, “You know; it has its place. I can’t knock it. We’d have to run the data on it and see if
the numbers make sense. We’d have to run the numbers on it pre-tax,
after tax, ROI – or Return on Investment. We’d have to see what our risks are, what
the contract risks are. For those of you who aren’t familiar, a second-to-die
policy is a policy that covers two lives, typically a husband and a wife, and then at
the second death, the life insurance pays out to the beneficiaries. And you may say, “Well, why is that needed? Why would some people buy that?” Well the reason for it is when you pull two
lives together, the cost of insurance drops substantially. Let’s say you’re dealing with two 70-year-olds,
and if we were to buy a policy on the 70-year-old Daddy or Momma in this case, that policy could
be in the…you know, depending on the face amount or the death benefit.. that policy
could be in the hundreds of thousands of dollars a year in premiums. Well, when you put two lives on it, the risk
becomes a little less for the insurance company, so the premium is less. If we don’t need the life insurance for income
replacement, which is the only reason why you would use second-to-die, then you can
go in and use a second-to-die policy for estate preservation issues. Again, there’s math there, and there’s a lot
of contract reading. Um, this particular attorney, I know he’s
not an insurance pusher, which is good, and he’s also very knowledgeable in insurance
contracts. And whenever he made the recommendation, I
said, “We can explore it. Let’s look at it and see if it makes sense
for the client, and if it does, we’ll certainly find the best company out there and the best
rate through the insurance brokerage world for this client. Second-to-die policy. It’s a little unusual. You don’t run into it a lot for the everyday
Joe, but for the estate planning world, it comes into play quite often. I’m kinda neutral on it. I don’t see it used for the average Joe; let’s
just say that, but in estate planning, it makes sense sometimes. So guys, Justin Goodbread with Financially
Simple, giving you another car video. Hey, make it a great day, folks.

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