Insurance Curator High-net-worth estate plans frequently use life insurance to provide immediate liquidity for estate taxes, equalize inheritances, and fund trusts. For many U.S. households — particularly couples in high-tax states like New York or Massachusetts — a survivorship (second-to-die) policy can be the most cost-efficient way to achieve a large, single payout at the second death. This article explains when survivorship makes sense, provides a practical New York City case study with modeled figures, compares carrier/product trade-offs, and shows the key variables advisors must stress-test.
Why consider survivorship (second-to-die) coverage?
Survivorship policies pay only once, at the death of the second insured. That structure creates specific advantages for estate planning:
- Lower aggregate premium cost compared with buying two equivalent single-life policies for the same aggregate death benefit.
- Perfect fit for estate-tax liquidity — when the goal is to fund a single tax event at the end of a second spouse’s life.
- Simpler administration: one contract, one insured event, often owned by an ILIT to keep proceeds out of the estate.
- Flexible product choices: whole life, survivorship universal life (SUL), and survivorship indexed UL are available from major carriers.
When it’s not appropriate:
- If you need proceeds at the first death (to replace lost income or pay a mortgage), individual policies or first-to-die solutions are better.
- If both spouses have very different ages/health profiles and one spouse is expected to predecease the other quickly, two single-life policies may be advantageous.
Regulatory and tax context (U.S.-focused)
- Federal estate tax: top federal rate is 40%; the inflation-adjusted basic exclusion (2024) is in the low-to-mid tens of millions per individual (see IRS guidance). See IRS estate tax overview for current thresholds and rules: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
- Many states impose estate or inheritance taxes with lower exemption thresholds than federal law. Advisors must model both federal and state outcomes when selecting product type. See state-by-state exemptions and rates: https://taxfoundation.org/state-estate-inheritance-tax-rates-exemptions/
Case study — New York City couple (illustrative model)
Situation:
- Married couple, ages 70 (spouse A) and 68 (spouse B), domiciled in New York City (NY state estate tax applies).
- Gross estate (pre-planning): $45,000,000.
- Objective: fund a $10,000,000 estate tax liquidity need at the second death and exclude proceeds from both estates via an ILIT.
- Modeling horizon: premiums paid for 10 years (level-pay funding). All figures are illustrative and based on typical market relationships (2023–2024 pricing behavior). Actual carrier quotes will vary.
Assumptions:
- Federal/state marginal combined effective tax on incremental estate value ≈ 48% (approximation combining federal top rate and NY state effective top brackets — advisors should run precise state-federal layering).
- Survivorship policy is a survivorship UL (SUL) targeted funding plan; single-life solution uses two individual UL policies.
- Quotes representative ranges taken from market research and consumer guides on survivorship vs single-life pricing (see Policygenius overview of survivorship life insurance): https://www.policygenius.com/life-insurance/survivorship-life-insurance/
Table: modeled comparison (illustrative)
| Scenario | Coverage structure | 10-year total premiums (est.) | Death benefit at second death | Estimated tax avoided (@48%) | Net benefit to family (death benefit − premiums paid) |
|---|---|---|---|---|---|
| A — Survivorship (recommended for pure estate liquidity) | One $10M SUL, ILIT-owned | $800,000 ($80k/yr) | $10,000,000 | $4,800,000 | $9,200,000 |
| B — Two single-life policies | Two $5M ULs (one on each spouse), ILIT-owned | $1,500,000 ($150k/yr) | $10,000,000 (paid across two events) | $4,800,000 | $8,500,000 |
Interpretation:
- In this illustrative example, the survivorship solution costs materially less in premiums over a 10-year funding window, yielding a higher net benefit to heirs after funding costs. The difference depends heavily on underwriting class, product type (guaranteed whole life vs UL), credited rates, and premium duration.
- Savings here (survivorship vs two single-life policies) ≈ $700,000 in net benefit across the modeled funding period.
Sources and guidance:
- Survivorship products often trade at a discount to two equivalent single-life policies because mortality risk is concentrated on the joint survivorship curve rather than two independent payouts — see consumer primer: https://www.policygenius.com/life-insurance/survivorship-life-insurance/
- Confirm current federal/state exemptions and taxation details on the IRS site: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax and state-by-state analysis: https://taxfoundation.org/state-estate-inheritance-tax-rates-exemptions/
Which products and carriers to model
Common HNW carriers and product archetypes used in survivorship planning:
- MassMutual, Northwestern Mutual — strong for guaranteed whole life (higher locked-in premiums, strong guarantees).
- Pacific Life, Lincoln Financial, Prudential, Transamerica — large survivorship UL and indexed UL capabilities, flexible funding, and robust underwriting for HNW clients.
- Pricing tendencies:
- Participating whole life (MassMutual, Northwestern): higher guaranteed premiums; excellent guarantees and dividends; good where permanence and conservatism are paramount.
- Survivorship UL / IUL (Pacific Life, Lincoln, Prudential): lower projected initial premiums with sensitivity to credited rates and policy charges; attractive when targeting lower short-term funding.
- For accurate fee schedules and guaranteed cost illustrations, request carrier-specific illustrations and insured-specific underwriting. Many carriers will provide sample illustrations and mortality assumptions to advisors on request.
Modeling variables advisors must stress-test
When comparing survivorship vs single-life solutions, run sensitivity tests on:
- Mortality timing (who dies first and when).
- Interest/crediting rates for UL/IUL policies.
- Premium-payment period (10, 15, lifetime).
- Policy expense load and illustrated vs guaranteed values.
- State estate tax liability scenarios (change domicile assumptions).
- Portability and marital deduction utilization.
- Alternative strategies: ILIT + gifting, premium financing, or PPLI wrappers.
For vendor-specific stress tests and scenario modeling see internal resources like:
- Premium Financing Stress Test: Real-World Scenario Analysis for a $50M Estate
- Modeling Estate Tax Outcomes: Insurance vs Gifting — A Side-by-Side Case Study
- Toolbox for Advisors: Calculators and Templates for Insurance-Based Estate Planning
Practical next steps for advisors and trustees (NY-focused)
- Run carrier-specific illustrations for the insureds’ exact ages, classes, and funding horizon. Ask carriers for both illustrated and guaranteed scenarios.
- Always model combined federal + state tax overlays (NY, CT, MA, NJ are common high-tax states where survivorship is particularly valuable).
- Consider ownership structure: an Irrevocable Life Insurance Trust (ILIT) is typically used to keep proceeds out of the insureds’ estates — model potential grantor trust income-tax implications if premium financing is used.
- Compare survivorship UL vs guaranteed whole life across both cost and guarantee axes — higher guarantees often come with higher premium cost.
Bottom line
For U.S.-domiciled high-net-worth couples with a large, single endpoint liquidity need (estate taxes, equalization, or legacy funding), a carefully underwritten survivorship policy frequently delivers the best cost-to-benefit ratio compared with duplicative single-life coverage — especially in high estate-tax states like New York. However, the decision is sensitive to product choice, underwriting, funding horizon, and state tax rules; run side-by-side illustrations and stress tests before selecting a structure.
For modeled comparisons, practical templates, and deeper scenario stress-testing, see the linked advisor resources above to build and present robust recommendations to clients.