The “One Big Beautiful Bill” (OBBB), signed July 4, 2025, permanently extends tax cuts introduced during President Trump’s first term in office and adds a new $6,000 standard deduction for seniors ($12,000 for couples) through 2028.
Another key component of the bill is that it raises the federal estate tax exemption to $15 million in 2026, with yearly inflation adjustments thereafter. These unprecedented exemption levels mean fewer families are likely to face estate taxes after loved ones pass.
These recent changes have left many families questioning whether keeping survivorship life insurance for estate planning still makes sense — and what they should do if they have a policy. Below, we’ll dive into what advisors should know to help their clients make the best decision for their estate plan.
THE ORIGINAL ROLE OF SURVIVORSHIP POLICIES
Joint survivorship life insurance is a single policy that insures two people and pays a death benefit only after both have passed. People have commonly used second-to-die life insurance as an estate tax tool.
A joint survivorship policy after tax law changes may not serve the same purpose it once did, but historically, these policies aimed to provide heirs with a lump sum cash payout. The cash could then be used to cover estate taxes, instead of having to sell assets like family businesses and real estate — often at a discount for a fast sale — to do so.
People have also used survivorship policies in other ways, including:
- Leaving gifts to family members and charities
- Equalizing inheritances between children
- Providing funds to cover outstanding debts
HOW THE BIG BEAUTIFUL BILL CHANGES THE LANDSCAPE
The One Big Beautiful Bill changes these calculations in two important ways: Many families no longer face federal estate tax liability, and seniors now enjoy a bigger tax break. Here’s a closer look at both.
High Estate Tax Exemption
Survivorship policies were a staple in advanced estate planning because tax exemptions were much lower. In the 1980s, the exemption limit was $600,000. Even in the early 2000s, the estate tax exemption was only $1 million, causing many families to owe estate taxes after loved ones passed away.
However, with the OBBB moving estate tax exemption limits to $15 million, far fewer families are likely to owe estate taxes. This shift highlights how the Big Beautiful Bill’s estate planning provisions may reduce the need for survivorship coverage. Advisors should recognize that today’s estate tax exemption survivorship insurance landscape looks very different from the environment when many of these policies were first purchased.
Tax Break for Seniors
At least through 2028, seniors get an extra tax break on top of the standard deduction they already receive. White House analysts estimate that nearly 90% of seniors may owe nothing on their Social Security, thanks to the enhanced deduction. With seniors keeping more of their tax dollars in their pockets, some of the old tax-driven reasons for holding on to a survivorship policy no longer feel as relevant.
SCENARIOS WHERE CLIENTS MAY NOT NEED SURVIVORSHIP COVERAGE
As laws and family circumstances change, there are several common scenarios where keeping a survivorship policy may no longer make sense:
- Estate size has dropped below the federal taxable threshold, removing the original need for estate tax protection.
- Beneficiaries are financially independent, so a death benefit is less critical.
- Client goals have shifted toward retirement income, long-term care funding or charitable giving.
- Premiums are straining liquidity or competing with other expenses.
- Family dynamics have changed, such as divorce, remarriage or blended families, which may alter the intended beneficiaries.
In these cases, it may be time to sit down with clients and explore whether the policy still fits their financial goals.
3 OPTIONS FOR ADVISORS AND THEIR CLIENTS
There are three main options available to seniors for doing away with a survivorship policy:
1. Letting the policy lapse: This ends the premium obligations, but leaves clients with zero return on the decades of payments made.
2. Cancel the survivorship life insurance policy: This is effectively surrendering the policy. The cash surrender value is usually the cash value in the account minus surrender charges and any outstanding policy loans or withdrawals. This usually amounts to only a fraction of the death benefit.
3. Selling the joint life insurance policy in a life settlement: A more strategic option is selling the policy to a third-party buyer. Seniors still receive a lump sum payment, but the payout is typically four to seven times higher than the surrender value. Selling the policy also eliminates their ongoing premium costs and policy management. Many seniors use the payout to help with retirement income gaps, pay for healthcare expenses or fulfill other legacy goals. Life settlements could be the best option for your clients.
WHY ADVISORS SHOULD LEAD THE CONVERSATION
Clients need guidance on which path makes the most sense for their estate and financial goals. Since each option has different financial consequences, it’s the advisor’s role to walk the client through the trade-offs, outcomes of other choices and how decisions affect long-term goals.
Advisors also have a fiduciary duty to act in their clients’ best interests, which means reviewing existing policies against current tax laws and changing family dynamics. By doing so, advisors give clients confidence that they’re making informed decisions about the future of their life insurance.
ESTATE PLANNING IS EVOLVING — SO SHOULD POLICY REVIEWS
The One Big Beautiful Bill is a perfect chance for advisors to take another look at client portfolios. In many cases, survivorship policies may no longer fit with today’s tax rules or your clients’ current goals.
When that’s the case, a life settlement can be a smart way to turn an old policy into cash that helps with retirement, healthcare or even new legacy plans. Guiding clients through these decisions not only reinforces your role as a trusted partner but also shows you’re committed to keeping their financial strategies up to date.
By teaming up with a licensed life settlement broker, you can ensure that clients receive the full value from policies they no longer need. Contact Life Settlement Advisors today to explore options for your clients and help them turn an outdated policy into a useful life settlement estate planning strategy.
