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New Law Changes Estate Planning
But experts warn clients not to give up their survivorship policies. By Ben Mattlin
NEXT YEAR, THE THRESHOLD FOR FEDERAL INcome-tax exemptions for estate, gift and generation-skipping transfer taxes will start to increase dramatically. While that may be good news for some clients, those who bought life insurance policies with survivorship provisions specifically to avoid these taxes could be out of luck.
What are they to do from here?“ Before anyone cancels [ their policy ], they should evaluate the policy’ s performance and how the old plan may be repurposed,” says Martin Shenkman, an estate planning attorney and CPA at Shenkman Tietz in Fort Lee, N. J.
Survivorship life insurance is a joint policy that covers two people, with the death benefit paid only after both insured people have died. This“ second-to-die” structure is often used by affluent Americans for estate planning to cover estate taxes, pro- vide for a disabled dependent or leave a legacy. It typically has lower premiums than a pair of permanent policies bought individually would, partly because survivorship insurance does not provide a payout to a surviving spouse.
The One Big Beautiful Bill Act, which President Trump signed into law on July 4, moved the goalposts on such planning, however. The law lifts the deduction threshold for estate, gift and transfer taxes next year from $ 27.98 million to $ 30 million for joint filers and from $ 13.99 million to $ 15 million for single filers, amounts that will be indexed for inflation every year after 2026. For some clients, these changes might mean nothing, but for others they could effectively eliminate estate, gift and transfer taxes. So what happens to policies with survivorship now?
Shenkman says an old survivorship policy that was purchased when the exemption limits were lower may become useless for
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