Which statements explain why second-to-die policies are attractive for estate planning?

Which statements explain why second-to-die policies are attractive for estate planning?

• A. I, II, and III
• B. I only
• C. I and II
• D. II and III

Answer: (C)

Second-to-d die policies are designed to provide a death benefit only after both spouses have died, so the proceeds are typically used to cover estate taxes, debts, and settlement costs that arise at the second death. This timing aligns with when many estates face liquidity needs, making it easier to transfer wealth to heirs without forcing the sale of assets at unfortunate times. Two practical reasons these policies are attractive are that they often cost less than buying two separate policies to cover the same level of estate liquidity, and the death benefit generally passes to beneficiaries income-tax-free, helping the estate meet tax obligations without eroding assets. In short, the strategy combines a more affordable premium with a payout that funds taxes and expenses when they’re due, which is why statements describing cost efficiency and timing of the liquidity are the most accurate. The idea that the policy pays out on the first death or provides ongoing lifetime income would not fit this purpose, since the benefit is intended to be realized at the second death and not as ongoing income.

Second-to-d die policies are designed to provide a death benefit only after both spouses have died, so the proceeds are typically used to cover estate taxes, debts, and settlement costs that arise at the second death. This timing aligns with when many estates face liquidity needs, making it easier to transfer wealth to heirs without forcing the sale of assets at unfortunate times.

Two practical reasons these policies are attractive are that they often cost less than buying two separate policies to cover the same level of estate liquidity, and the death benefit generally passes to beneficiaries income-tax-free, helping the estate meet tax obligations without eroding assets. In short, the strategy combines a more affordable premium with a payout that funds taxes and expenses when they’re due, which is why statements describing cost efficiency and timing of the liquidity are the most accurate. The idea that the policy pays out on the first death or provides ongoing lifetime income would not fit this purpose, since the benefit is intended to be realized at the second death and not as ongoing income.