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Protect your partner with life insurance

Life insurance can help provide vital financial protection for married and unmarried couples.

When the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA), same-sex couples won an important victory. The decision opens the door for same-sex couples to access more than 1,000 legal protections and benefits from which they were previously blocked. . With substantial changes in the works, such as tax filing procedures and access to employer-sponsored benefits, it’s important to have a plan in place to protect your partner or spouse.

Here’s how life insurance can protect the people you care about:

  • It can replace income after your death so that your partner can continue to live the life you have built together.
  • Your policy’s death benefit can also provide funds to pay potential estate taxes.
  • Depending on how and when you purchase your policies, you and your partner may be able to secure life insurance benefits that are not considered part of your estates for estate tax purposes.
Cross-owning policies

You and your partner may consider cross-owning policies. When you cross-own life insurance policies, you each buy a policy on the other’s life. At your partner’s death, as the owner and beneficiary of the policy, you receive the death benefit and can create a plan to turn that benefit into a stream of income. Because the policy was not your deceased partner’s property, the policy’s death benefit would generally not be counted as part of his or her estate for estate tax purposes. However, the value of the policy your deceased partner owned on your life generally would be included in your partner’s estate for estate tax purposes.

Naming your partner as beneficiary

By naming each other as beneficiary on a policies that you each own on your own lives, the death benefit on the policy you own would generally be included in your estate for estate tax purposes. Whether estate taxes are owed will depend on the size of your estate.

In any case, you should determine with your tax and legal advisers the best approach to acquiring life insurance in your individual circumstances. Whichever way you structure your purchase, you may need to demonstrate an insurable interest to purchase life insurance on each other. Married couples are assumed to have an insurable interest. Couples who own a house or business together are also considered to have an insurable interes. You can prove insurable interest by providing evidence of jointly owned assets and, possibly, copies of your wills or trust documents.

Of course, the best way to learn more about how to protect your partner, as well as children you may have, is to speak with your tax and legal advisers.

You can contact an Agent for help with any of your life insurance and retirement income needs.

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This is document is intended to provide general information only. It may not be relied upon to avoid IRS or other tax penalties. How this information may apply to you depends upon your individual circumstances. You should consult with your own tax and legal advisers to determine how this general information may apply in your individual situation. New York Life and its employees cannot provide tax or legal advice.