The threshold for federal income tax exemptions for estate, gift and generation-skipping transfer taxes increases dramatically in 2026. If you purchased a life insurance policy with survivorship provisions specifically to pay these taxes, don’t cancel your policy just yet, says the article “New Law Changes Survivorship Insurance, Estate Planning” from Financial Advisor.
Survivorship life insurance is a joint policy that provides coverage for two people. The death benefit is paid only after the second person has died. Affluent Americans use this financial product to pay for estate taxes, provide for a disabled descendant, or leave a legacy. The premiums are usually lower than those of individually purchased permanent policies.
However, the One Big Beautiful Bill Act lifts the deduction for estate, gift and transfer taxes to $30 million for joint filers and $15 million for single filers. These amounts will be indexed for inflation every year after 2026.
A policy purchased when exemption limits were far lower may become unnecessary for estate taxes. However, it shouldn’t be abandoned, as it may have other uses. Take a holistic look at your entire circumstances and future needs.
If your second-to-die insurance policy was placed in an irrevocable trust, you may want to use the trust assets instead to close the gaps in coverage, such as for long-term care or a disability. Survivorship policies may be a good tool for blended families, securing an inheritance for the children of a first marriage while leaving the rest of the estate to the second spouse or the children of a second marriage.
If the policy has a cash value and it’s performing well, it may be useful as an asset protection tool. While insurance policies are not as sexy as tech stocks, they could provide a soft landing amid market swings.
These policies may also be sold on the secondary market, which many people may decide to explore while the current high exemptions remain in place. Don’t rush into this, as you may regret selling the policy. Over time, you might become too old or unhealthy to qualify for a new policy. If the exemptions change in the future, you might want to have the policies.
These policies were created in response to a federal tax law enacted in the early 1980s, which allowed couples to defer federal estate taxes until both spouses had died. Survivorship insurance policies were designed to prevent a surviving spouse from needing to deplete their finances to pay large tax bills. Survivorship insurance offered a relatively low-cost solution to fund future estate tax liabilities.
Before making any changes, speak with your estate planning attorney. Consider your overall situation and your state’s estate tax laws. Circumstances change, as do estate laws and survivorship insurance may end up being a powerful part of your estate plan after all.
Reference: Financial Advisor (Dec. 5, 2025) “New Law Changes Survivorship Insurance, Estate Planning”