One effective tool to help protect your net worth is a survivorship life insurance policy.  Without proper estate planning, a chunk of your money could go to the IRS at your death. While estate taxes may be inevitable, there are ways to conserve — or at least replace — a portion of your estate.

Survivorship Life is a great policy to have if you have significant net worth as estate taxes can be as high as 55%.    Survivorship / “Second to Die” policy’s cover you and your spouse’s lives and it is paid out on the second death.   It serves as a great estate planning tool as it can be purchased by an irrevocable trust, with your heirs as the beneficiary and the insurance proceeds are kept out of the estate for tax purposes.    The death benefit can replace a portion or all of the estate that was eaten up by paying Uncle Sam.   Survivorship life has other benefits too as it is generally less expensive than individual polies as two lives are insured.  It also has more lenient underwriting generally as two lives are insured.  It is not uncommon for a client to be denied coverage individually and then be able to qualify with their spouse for a “Second To Die” policy.

The estate tax future is up in the air and may have a shake up with this new administration.    Currently,  the exemption for 2009 is 3.5 million and the estate tax rate is 45%.  In 2010, the estate tax goes away for the year and it is unclear where it goes from there.  According to the Economic Growth and Tax Relief Reconciliation Act of 2001, in 2011 a single person will have an exemption of 1 million dollars and the amount above that will be estate taxed at a rate between 41%-55%.   Something to consider as well is if you have state death or inheritance taxes in your state.  Also, your heirs may need to pay capital gains taxes when selling inherited assets.    Talk to your advisor about your estate plan and see if survivorship life may be right for you.