Guaranteed Universal Life Policies and Estate Planning

Consider purchasing a guaranteed universal life (GUL) policy to ensure that your heirs inherit your property rather than the Internal Revenue Service (IRS).

GUL is a type of insurance that is also known as “second-to-die life insurance.” It is intended to provide funds after the death of the second insured. During the coverage period, it may also provide some flexible opportunities.

According to Mutual of Omaha Vice President Andy Hutchison, there is no estate tax on assets left to a U.S. citizen spouse under current federal law. However, the estate tax is triggered when the second insured dies and the assets are left to children or others.

“Far and away, the most common use for survivor life insurance is to pay the federal estate tax,” said Hutchison. “That reason alone probably constitutes at least 90 percent of the cases we see.”

Uses for Guaranteed:

  • Fund buy-sell agreements for businesses to purchase the company when the last surviving owner dies.
  • Establish a special needs trust for a couple with a special needs child to provide support after the parents pass away. The beneficiary of the GUL policy can be a “special needs trust” without disqualifying the child from state aid or SSI.
  • Cover estate settlement costs after the second death, when they are typically the highest.
  • Preserve charitable gifts in an efficient and cost-effective manner without jeopardizing the estate plan.

If you are considering guaranteed universal life insurance, keep in mind that it can be more expensive than term insurance. However, insurance rates are at an all-time low, so please contact your insurance agent as soon as possible.

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