When should life insurance be purchased on my spouse's life?
If you're married and both you and your spouse work, each of you should probably have an
individual life insurance policy. Creating a single irrevocable life insurance trust to
hold the policies could provide some important tax benefits if the value of your estate
exceeds $625,000 for 1998 and $650,000 for 1999. According to Wealth Enhancement &
Preservation (The Institute Inc., Denver), "The single irrevocable life insurance
trust provides a tool to insure a spouse without correspondingly increasing the federal
estate taxes to the children and grandchildren. This approach also allows the surviving
spouse and family members to offset the financial consequences due to the loss of a
spouse's income or contributions to the family as a homemaker. This arrangement is both
income tax-free and estate tax-free, and the trust makers get full value for the premium
dollars they spend on their coverage. Life insurance should be purchased on your life or
your spouse's life individually whenever there is a need to provide an income stream or
principal amount to the survivor."