It might not be a good idea to cancel survivorship insurance, even if the federal estate tax is repealed.
Dropping survivorship insurance might not be a wise decision, according to Financial Advisor in “Eliminating Estate Tax Could Torpedo Survivorship Insurance Market.”
People frequently find that they have to sell some assets to come up with the cash to pay the federal estate tax. In order to get around this, many wealthy people purchase survivorship or second-to-die insurance policies. These policies pay a death benefit when one spouse passes away. As a result, liquid cash is available to pay the estate tax out of the insurance proceeds.
With Republicans now in control of the government, many people anticipate that it is only a matter of time until the estate tax is repealed. This new political reality has led many to consider dropping their expensive survivorship insurance policies.
After all, there is no guarantee that any repeal of the estate tax will be permanent. Political winds can shift quickly and, if the Democrats retake control of the federal government in a few years, the estate tax could come back.
People who cancel their survivorship policies now, will likely find that premiums have gone up significantly later, if they need the insurance again.
It might be wise to check with an estate planning attorney, before cancelling any survivorship insurance.