What is a common benefit of survivorship life insurance in estate planning?

Survivorship life insurance, also known as second-to-die insurance, is primarily designed to provide benefits to beneficiaries after the death of the second insured individual. This feature makes it particularly useful in estate planning, as it helps ensure that any estate taxes incurred upon the passing of the surviving insured are covered. When the second insured passes away, the policy pays out a death benefit which can be used by the heirs to settle estate taxes, thereby preserving more of the estate's value for future beneficiaries.

The unique characteristic of survivorship life insurance is that it pays out only after both insured individuals have died. This contrasts with other types of life insurance, where funds are paid upon the death of the first insured. By utilizing this type of policy, families can manage the financial implications of estate taxes effectively, ensuring that their heirs do not face significant financial burdens after losing a loved one.

This aspect of survivorship life insurance makes it an attractive option for individuals who are looking to create a well-structured estate plan that accounts for potential estate tax liabilities.