Survivorship Life: Expanding Your Horizons

Over the years, a variety of life insurance products have been created to meet the demands of individuals with specific needs and circumstances. Survivorship life (also known as second-to-die or last-to-die coverage) is one type of insurance product. Its unique feature allows two people to be insured under one insurance policy.

What's the Big Deal?

Survivorship life insurance pays a death benefit at the death of the second insured. This type of coverage is generally less expensive than two individual policies and may result in significant cost savings. In addition, a policy can generally be obtained even if one of the insured individuals is considered medically uninsurable. It is important, however, to recognize that survivorship life insurance may not be for everyone.

Since this policy pays a death benefit at the death of the second insured, the uses of survivorship life are a little different from traditional "single life" policies. For example, the cost-effectiveness of survivorship life generally makes it useful for funding future estate tax payments, maximizing gifts to future generations or a favorite charity, or preserving a family business.

Consider the Benefits

It is always prudent to review your insurance coverage regularly. Periodic assessments may help you determine whether survivorship life insurance will help meet your current needs, as well as your future goals and objectives. And, when you buy the coverage that works for you, the benefits may far exceed the costs.

Proposed IRA Rules Offer Flexibility

The Internal Revenue Service (IRS) recently introduced sweeping changes to the rules governing distributions from Individual Retirement Accounts (IRAs) and other similar retirement savings plans. Although the proposed regulations may not be finalized until January 1, 2002, taxpayers have the option to adopt them now.

The new taxpayer-friendly rules offer retirees greater flexibility in setting required minimum distribution (RMD) amounts. Smaller payouts will let retirees stretch their tax-deferred savings over a longer period of time. Taxpayers will also receive a second chance to sort out paperwork errors, adjust beneficiary designations after an account owner is receiving payouts, and change retirement plans without penalty.

The price for the relaxed rules is stronger enforcement of reporting requirements. IRA providers will have to report required minimum distribution amounts to both the taxpayer and the IRS. Retirees should also be aware that a buildup in covered retirement plan assets could subject their estates to higher estate taxes. To receive the greatest benefit from the new regulations retirees should consider consulting a qualified financial professional.

The Sunny Side of 50

In today's world, hitting 50 isn't what it used to be. In fact, with modern advances in medical care and improved health education, "fifty-somethings" can look forward to living longer and feeling better than ever.

Recent research is beginning to show the fabled "mid-life crisis" may be more myth than reality for many people. Despite traditional effects of aging, many people seem to be enjoying their newfound maturity. Perhaps they are in a better position to achieve a more balanced lifestyle with careers progressing, children grown, and elderly parents still managing on their own.

There is More to Life than a Paycheck

If you've been focusing on work—either by necessity or choice—to the exclusion of all else, now may be the time to begin developing other facets of your personality and interests. "Workaholics" sometimes later regret having missed out on important segments of their lives that can never be recovered. And, with many people retiring at earlier ages, you may find more opportunities to spend time with your spouse, children, or grandchildren; pursue a long-held interest; or get involved in community service.

Taking Stock

Can life really be better after 50? The answer may depend on how prepared you are financially so that you can retire early. If you're not yet in a position to lessen your work schedule, it may still be early enough to start planning a strategy that allows for some lifestyle changes at age 55 or 60.

Your horizons are limited only by your imagination—and your financial means. Reassessing your life can be difficult, but it can also lead to a more fulfilled future. Hitting 50 may be the ideal milestone to begin enlarging and enriching your world while you possess the good health and energy to enjoy it.

Protect Your Insurance Proceeds
from the Estate Tax Bite

Many people recognize the need to protect their loved ones in the event of death. Adequate life insurance should provide funds to help cover any necessary expenses, such as your mortgage, your children's education, and day care for your young children, as well as to guarantee a comfortable standard of living for your dependents.

But, have you ever considered how your family will manage if your life insurance proceeds are reduced by current estate tax obligations that could run as high as 55 percent?

Policy Ownership Makes the Difference

There are ways to preserve your insurance proceeds from the estate tax bite. To accomplish this objective, however, it is essential to eliminate all "incidents of ownership" in the policy at least three years before your death. This concept entails:

• Relinquishing all ownership rights to the policy. These rights include changing beneficiaries, surrendering or canceling the policy, assigning the policy or revoking a prior assignment, borrowing against the cash value, and pledging the policy as collateral for a loan.
  
• Ensuring that your estate receives no additional economic benefit from the policy beyond any legal obligations of the beneficiary, such as payment of outstanding debts or taxes.
  
• Paying policy premiums from a separate source of funds, instead of your personal account, to help clarify policy ownership.

Consider an ILIT

A properly structured irrevocable life insurance trust (ILIT) is one mechanism to help ensure all incidents of ownership are eliminated. Although this approach necessitates relinquishing ownership and control of the policy, the resulting gain may be worth these tradeoffs. Consider speaking with a qualified insurance professional who can review your situation and recommend ways to structure your policy for the benefit of your loved ones.