Real-World Scenarios: Modeling Survivorship Policy Outcomes for Multigenerational Families

Survivorship (second-to-die) life insurance is a cornerstone strategy for high-net-worth (HNW) estate planning in the United States. For families in New York City, San Francisco, Miami, Houston, and other HNW hubs, properly modeled survivorship coverage can provide liquidity to pay estate taxes, equalize inheritances across generations, preserve family businesses, and support philanthropic goals. This article walks through realistic, location-specific scenarios, sample numbers, carriers, and implementation options so advisors and families can compare outcomes and make informed choices.

Why survivorship policies for multigenerational estates?

• Single death benefit payable after the second spouse dies, which suits married couples seeking to preserve wealth for children and grandchildren while minimizing upfront premium costs compared with two single-life policies.
• Estate tax liquidity: With the federal estate tax top rate at 40% and a 2024 basic exclusion of $13,610,000 per decedent, married couples with combined estates above roughly $27.22M often face exposure without planning. (See IRS guidance on estate tax.) [1]
• Trust-friendly: Placing a survivorship policy in an Irrevocable Life Insurance Trust (ILIT) can keep proceeds out of the surviving spouse’s estate and reduce estate tax, subject to planning rules.

For technical background on the mechanism and use cases, see our primer: Survivorship Life Insurance Explained: Funding Estate Taxes and Preserving Family Wealth.

Key modeling assumptions (U.S.-focused)

• Federal estate tax exclusion used: $13,610,000 (2024 figure) per decedent. Source: IRS. [2]
• Top federal estate tax rate: 40%.
• State estate or inheritance taxes vary — New York, Massachusetts, Oregon, and other states have lower exemptions or additional taxes that must be modeled locally (e.g., New York estate tax thresholds and credit). Always include state-level modeling for NYC, Boston, or Portland clients.
• Example couple ages: 65 (spouse A) and 63 (spouse B); healthy (preferred or standard underwriting).
• Policy types considered: Second-to-die term, survivorship universal life (SUL), survivorship whole life (permanent).
• Insurers referenced: New York Life, MassMutual, Northwestern Mutual, Prudential — major carriers that regularly underwrite survivorship products for HNW clients.

For implementation specifics that tie survivorship policies into trust structures, see: How Survivorship Policies Work with ILITs and Trust Structures for HNW Estates.

Real-world scenario set — modeled outcomes

We model three representative multigenerational family situations in major U.S. locations. Numbers are illustrative; speak with an actuary/insurer for exact quotes.

Scenario inputs common to all examples:

• Federal exclusion: $13.61M per decedent.
• Federal estate tax rate: 40%.
• No other planning (unless noted).

Scenario A — $25M family estate, NYC-based real estate and investment assets

• Combined estate: $25,000,000
• Taxable estate after two spousal exemptions: 25,000,000 − 2 × 13,610,000 = −2,220,000 → effectively no federal estate tax if portability of unused exemption is properly elected. However, in married couples planning where portability may not be available/desired or state estate taxes apply (NY estate tax threshold far lower than federal in some cases), liquidity is still a concern.
• Objective: equalize bequests to two adult children and fund $2M charitable gift.

Tactical modeling:

• Purchase a $5M survivorship policy inside an ILIT to fund state estate tax and equalize distributions.
• Estimated premium (illustrative): a permanent survivorship policy at ages 65/63 with preferred health may run roughly $20,000–$45,000 annually for $5M across carriers like New York Life and MassMutual; term options are cheaper but provide no lifetime guarantees. (Actual quotes vary by product, underwriting, and choice of universal vs whole life.)
• Result: policy proceeds provide immediate liquidity to settle state taxes and transfer a $2M charitable gift without forcing asset sales.

Scenario B — $40M estate, San Francisco Bay Area family business plus real estate

• Combined estate: $40,000,000
• Taxable estate after exemptions: 40,000,000 − 2 × 13,610,000 = 12,780,000
• Federal estate tax exposure (~40%): 12,780,000 × 40% = $5,112,000

Tactical modeling:

• Option 1: Buy a $6M survivorship policy (ILIT-owned) to cover federal liquidity and some state taxes.
• Option 2: Layered approach — $3M second-to-die permanent policy + separate single-life policy on the older spouse to provide earlier liquidity if a surviving spouse dies soon after the first death.
• Estimated premiums:
  • $6M permanent S2D: approximately $40,000–$90,000/year depending on product (illustrative; large permanent policies from Northwestern Mutual, MassMutual, or Prudential vary widely).
  • Term survivorship covering 10–20 years is materially cheaper but may not solve long-tail risk.

Scenario table (simplified):

Notes: premiums are broad industry ranges for HNW approved products; exact pricing depends on carrier underwriting class, policy type (term vs SUL vs whole life), and funding mechanics.

Funding strategies and commercial considerations

• Single-premium ILIT funding vs annual-pay: Single-premium transferable instruments simplify gifting but can trigger gift tax issues; annual gifts via Crummey powers are commonly used to fund ILIT premiums.
• Agency and carrier selection: New York Life and MassMutual are often active in permanent survivorship markets; Prudential and Northwestern Mutual also offer second-to-die solutions and linked universal life products. Competitive quoting across carriers is essential — premiums for the same face amount can differ by tens of thousands annually.
• Underwriting and impairment risks: For HNW families in San Francisco or Miami with older average ages, guaranteed products (e.g., guaranteed universal life) may be preferable to long-term term policies. Carriers will price based on combined medical underwriting and financial justification.

For guidance on premium design and coverage sizing for large estates, consult: Designing Survivorship Policies for Large Estates: Coverage Amounts and Premium Strategies.

Tax and trust nuances (practical checklist)

• ILIT ownership avoids inclusion in the surviving spouse’s estate only if trust rules are followed (e.g., no retained incidents of ownership).
• Three-year rule: Transfers of existing policies into an ILIT where the insured dies within three years may result in inclusion under IRC §2035 — plan early.
• Gift tax considerations: funding annual premiums with Crummey withdrawal powers uses donor annual exclusion; large single-premium gifts may use lifetime exemption.
• Consider state estate tax and generation-skipping transfer (GST) tax exposure when mapping multigenerational objectives.

For integration with ILITs and trust structures, review: How Survivorship Policies Work with ILITs and Trust Structures for HNW Estates.

Practical next steps for advisors and families in the U.S.

• Model multiple realistic mortality and market scenarios: project estates in New York, California, Florida, and Texas separately to capture state tax differences and asset mix realities.
• Get competitive quotes from major carriers (New York Life, MassMutual, Northwestern Mutual, Prudential) and request actuarial pricing for both permanent and term survivorship options.
• Coordinate ILIT drafting with the estate attorney to avoid three-year inclusion and ensure Crummey notices and trustee powers are in place.
• Run sensitivity analysis: varying mortality timing (e.g., surviving spouse living 5–15 more years) changes net present cost and may favor layered solutions.

Sources

• Investopedia — Survivorship Life Insurance overview: https://www.investopedia.com/terms/s/survivorship-life-insurance.asp
• IRS — Estate Tax: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
• Bankrate — Second-to-die life insurance: https://www.bankrate.com/insurance/life-insurance/second-to-die-life-insurance/

By modeling realistic outcomes (location-specific tax rules, business liquidity needs, and multigenerational transfer goals), HNW families in New York City, San Francisco, Miami, and Houston can evaluate survivorship policies versus alternatives and decide on carrier/product structures that best align with transfer, liquidity, and philanthropic objectives.