Since the inception of 2nd to die or survivorship life insurance policies to protect estates from being pillaged by estate taxes, most of the policies were written as traditional universal life or whole life insurance. Cash value policies.
When the cashless universal life with an external no lapse guarantee came along people were able to secure this valuable estate preservation tool for a fraction of the cost of the traditional policies. Without the burden of funding unneeded pools of cash value coverage was literally available for new pennies on the old dollars.
An example of this was a client four years ago who replace their $5,000,000 Mass Mutual 2nd to die whole life policy that had an annual premium of $89,000 and was only guaranteed to age 94, with a $5,000,000 Protective Life policy for $32,000 annually with a guarantee to age 121.
Now with the external guarantee products being revisited due to current reserve requirements and a lot of companies either raising the rates or discontinuing new sales of the products, attorneys are encouraging clients with existing survivorship policies to review them now. Not later. Now.
We still don’t know what will happen with the estate tax laws next year, but with the current news out of Washington leaning toward higher taxes for the wealthy, I think we can assume that the estate tax exemption won’t get bigger than the current $3.5 million and the estate tax rate will likely not go lower than the current 45%. The need for 2nd to die life insurance and irrevocable life insurance trusts isn’t likely to go away anytime soon.
Bottom line. If you have an estate preservation policy chances are very good that you are paying too much for it. There is a window of opportunity to fix that and with keeping the money in the family being the common goal, it’s time to have that policy reviewed and for very good reasons it is prudent to have it reviewed by someone other than the original agent you bought from.