Estate Planning using Term Life Insurance

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With the current “Band-aid” on estate taxes and the exclusion amount, some people aren’t sure what their long term estate tax implications could be.  A 10 year term policy with a conversion to permanent insurance may be a good solution for high net worth individuals whose estate value is approaching the current taxable threshold, but now quite there.

For example, a married couple with an 8 million dollar estate, with a properly structured AB Trust or bypass trust, may not owe any estate taxes if they were to both die in 2012.  However, if the current estate tax exemption (currently 5 million per individual) were to drop to, say, 3 Million per individual, then this couple would have an estate tax problem.

Since we don’t know what the future holds for estate tax legislation, some affluent families are purchasing 10 year term as a “wait and see” type strategy.  If the exclusion amount gets permanently set at 5 million per individual, or if estate taxes are done away with completely, then these wealthy individuals may decide to drop their coverage.