Eliminating Estate Tax Could Torpedo Survivorship Insurance Market

Financial Advisor Magazine writes about whether estate tax repeal would adversely impact the survivor insurance market.  The article begins as follows:

One of the most overlooked issues in the tax reform debate is whether the estate tax will survive. For advisors and insurance agents working with affluent married couples with $11 million of more in net worth, the ramifications could be dramatic.

Some affluent clients have purchased survivorship or second-to-die insurance policies to pay estate taxes when one spouse dies and the estate tax bill comes due. Depending on the final version of tax reform, it’s possible some clients may not need the insurance for estate tax purposes, but some advisors and accountants think some clients might still use it for income tax reasons as well as to maximize the size of the inheritance they leave behind.

Indeed, if the estate tax is abolished, that insurance could theoretically become unnecessary. Some observers of the high-net-worth world like Russ Alan Prince expect many wealthy people to try to unwind their survivorship insurance policies if that scenario materializes. The bigger the premiums they have left to pay, the greater the incentive to let the policies lapse. However, wealthier clients with more sophisticated advisors may try to convert the policies to private placement life insurance.

Like other aspects of tax reform, repeal of the estate tax is hardly guaranteed. And because it effects so few individuals, there has been virtually no conversation about it in Washington this year.

What discussion has surfaced has left serious estate planners perplexed. “They are talking about changing the estate tax but not the gift tax,” says one expert. “That doesn’t make any sense, but it also doesn’t mean it won’t happen.”

See full article at: Eliminating Estate Tax Could Torpedo Survivorship Insurance Market

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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