Estate Planning Life Insurance – Preserve Wealth & Protect Heirs

Estate Planning is not just for the ultra-wealthy. Estate plans allow you to preserve what you’ve built, and pass it on to your intended beneficiaries.

Life insurance solves issues such as estate taxes, liquidity gaps and unequal inheritances, in a way few financial tools can.

If you have a large estate, a small estate, or long-term legacy goals, the right policy can protect your family and your wealth when it matters most.

In this guide, we show you how to find the best life insurance companies, as well as life insurance underwriting for those with health conditions.

Estate planning life insurance is designed to efficiently transfer wealth after death.

It’s commonly used to:

• Pay estate or inheritance taxes
• Create tax-free liquidity for heirs
• Create an estate for your heirs
• Equalize inheritances among children
• Fund charitable giving
• Pension Maximization
• Life Insurance Retirement Strategies

These policies are often owned by a trust that is either revocable or irrevocable.

As of 2025, the federal estate tax exemption is $13.61 million per person; however, any amount exceeding that can be subject to taxes of up to 40%. In addition to federal, you may have an estate tax in your home state.

In short, life insurance fills the gap when taxes, timing, or asset complexity could otherwise derail your legacy.

When life insurance is used in estate planning, underwriters assess your financial health and medical health as part of underwriting.

Here’s what underwriters evaluate:

• Health and age – Determine what rate class applies
• Estate size – Supports the death benefit amount requested
• Purpose of the policy – Tax coverage, liquidity, gifting, or wealth transfer
• Ownership structure – Underwriters want to know who the owner and beneficiary are.
• Funding source – Annual gifts, lump-sum premiums, or premium finance

If you’re applying for survivorship coverage (second-to-die), both individuals must go through underwriting, although most companies offer an uninsurable rate class if one spouse has significant health issues.

Approval is based on the combined risk of both lives.

In larger cases, some companies allow informal inquiries or trial applications before submitting a formal request, saving time and avoiding unnecessary declines.

Be prepared to answer the following:

• What is your current net worth, including real estate, business interests, and investments?
• Do you anticipate your estate being subject to federal or state estate taxes?
• Will the policy be owned by a trust (such as an ILIT)?
• Who are the beneficiaries, and what are their relationships to you?
• What is the intended use of the life insurance (e.g., tax coverage, inheritance equalization)?
• Do you currently have life insurance in force?
• How will the premiums be paid—annually, via a lump sum, or financing?

For policies above $5 million, it’s common for underwriters to request financial documentation such as tax returns, estate plans, or trust summaries.

For estate planning, permanent coverage is required. Term life is generally not suitable, as it may expire before death and doesn’t support long-term strategies.

Survivorship Life Insurance (Second-to-Die)

• Covers two lives
• Pays out when the second insured passes away
• Often used to pay estate taxes when both spouses are gone
• Can be universal, index universal, or whole life insurance

Guaranteed Universal Life (GUL)

• Level premiums
• No cash value
• Coverage guaranteed to age 100–121
• Most popular for estate liquidity

Indexed Universal Life (IUL)

• Flexible premiums
• Cash value grows with market index performance (not invested directly)
• Can be used for gifting or charitable strategies

Whole Life Insurance

• Conservative cash value growth
• Dividend potential
• Strong guarantees

1. Apply early
   Coverage gets more expensive and more challenging to qualify for as you age. Start while you’re still insurable.
2. Use the proper ownership structure.
   If the estate tax is a concern, have the policy owned by an ILIT. This keeps the death benefit out of your taxable estate.
3. Prepare financial documentation
   Net worth statements, tax returns, and trust documents may be required for high-value policies.
4. Consider survivorship policies for couples
   These are often more affordable and strategically better for estate tax coverage.
5. Work with an experienced broker.
   Estate cases require a deeper understanding of underwriting, trust coordination, and funding strategies.
6. Be ready to justify the coverage amount.
   For large face amounts, the insurer will require clear evidence of financial need and a specific purpose.

Life insurance plays a vital role in modern estate planning. Whether you’re protecting your estate from taxes, equalizing inheritances, or creating a lasting legacy, the right policy provides certainty and control.

If you’re considering life insurance for estate planning, work with an advisor who understands both the financial and underwriting sides of the equation. It’s your legacy, make sure it’s protected.