Protect your partner with life insurance
Life insurance can help provide vital financial protection for married and unmarried couples.
We are updating this article in light of the recent Supreme Court decision on DOMA. Please check back soon for updated content.
Same-sex couples often don’t have the same financial protections that opposite-sex couples enjoy under the law. For instance, same-sex couples, even in states where they can marry legally, generally are not entitled to Social Security survivor benefits, and many employer-sponsored defined benefit pension plans do not offer a payout option for same-sex or unmarried couples. And, estate and gift tax laws generally are less favorable for same-sex couples than for opposite sex couples.
Life insurance can provide financial protection for couples facing unique circumstances.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.
In this regard, you and your partner might consider cross-owning policies on the other’s life or each of you might acquire a policy on your own life, naming your partner as your beneficiary. 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 create a plan to provide regular 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.
When you simply each name the other as beneficiary on a policy that you each respectively own on your own life, the death benefit on the policy you own would generally be includable 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 interest, although only up to the value of their shares of the mortgage or business. 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.
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.