Legal Definitions - last-survivor life insurance

Last-survivor life insurance, also commonly known as second-to-die life insurance, is a type of life insurance policy that covers two or more individuals, typically a married couple. Unlike traditional life insurance that pays a benefit upon the death of the first insured person, a last-survivor policy only pays out the death benefit upon the death of the *last* surviving insured individual.

This type of policy is often used in estate planning to provide funds at a specific future point, such as when estate taxes become due or when a legacy gift is intended to be made after both individuals have passed away.

• Example 1: Estate Tax Planning for Heirs

  Mr. and Mrs. Rodriguez, a wealthy couple with substantial assets, are concerned about the potential estate tax burden their children might face after both parents have passed away. They purchase a last-survivor life insurance policy. The policy is structured so that the death benefit is paid out to their children only after both Mr. Rodriguez and Mrs. Rodriguez have died.

  This illustrates last-survivor life insurance because the payout is specifically triggered by the death of the *second* spouse. The funds are then available to their children to help cover any estate tax liabilities that arise when the entire estate passes to them, without having to liquidate other assets.

• Example 2: Charitable Legacy Giving

  Dr. Eleanor Vance and her husband, Mr. Arthur Vance, are dedicated philanthropists who wish to leave a significant donation to their alma mater's scholarship fund. However, they also want to ensure they maintain full access to their assets throughout their own lifetimes. They purchase a last-survivor life insurance policy, naming the university's scholarship fund as the beneficiary. The policy will pay a large sum to the university only after both Dr. Vance and Mr. Vance have passed away.

  Here, the policy serves as a planned future gift. The university receives the benefit only after the death of the *last* surviving spouse, allowing the couple to manage their personal finances without impacting their philanthropic goal until both are gone.

• Example 3: Funding a Special Needs Trust

  The Chen family has a child with special needs who will require lifelong care and financial support. Mr. and Mrs. Chen want to ensure that a special needs trust is fully funded to provide for their child's future expenses, but they want this funding to occur only after both parents are no longer able to provide direct care. They purchase a last-survivor life insurance policy, with the special needs trust designated as the beneficiary. The policy pays out its benefit to the trust upon the death of the second parent.

  This example demonstrates how last-survivor life insurance can be used to fund a long-term care plan. The trust receives the necessary capital only after the death of the *last* parent, ensuring continuous financial support for their child when both primary caregivers are gone.