Life Insurance Benefits For Homosexuals & Estate Protection: Term, Universal, Quotes, Rates, Costs

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In most of the country at present, homosexuals cannot marry—(okay, so they can marry, but it entails that they follow the mores relating to the historical meaning of "marriage"). Consequently, life insurance, when used for estate protection, holds greater value for homosexual inamoratos.

How is that, now? In the U.S., married couples have a shared estate between them (rather than each having an individual estate). That means that a couple's belongings will not be exposed to estate taxes until both spouses are dead. (Historically and in terms of macroeconomics, it made good sense to reward married couples financially because they devoted much of their own finances, as well as energy and effort, to the rearing of the next generation, the generation that would be running things after their predecessors retired.)

Unmarried couples (most homosexual couples) do not share an estate after this fashion, so if either partner perishes, his/her assets may be nailed by a tax exceeding 50%! In 2011, the estate tax jumps to 55%. Estates valued at less than a million dollars are exempt, however. (The year 2010 offers a reprieve from federal estate tax, so it's a good time to die if estate protection is of great concern to you.)

How does this relate to life insurance?

Life insurance is a cost-effective way to handle estate taxes—(the most cost-effective way I've seen). Spending money on a life insurance policy removes that money from your current, taxable estate and brings it back (often with greater abundance) tax-free. That is, a life insurance policy's death benefit incurs no income tax, and by making use of an ILIT (Irrevocable Life Insurance Trust) and Crummy power note, it can bypass estate taxes. Thus, using life insurance is cheaper than just paying off estate taxes with cash.

That's not where the benefits end, however. While it is possible for an estate to contain enough cash to pay off its own taxes, that's rather rare. (How many estates of more than a million dollars are 55% liquid?) For estates of this size, it's common to have to sell assets in order to pay off the taxes, and because recipients of an estate have only nine months to pay off the taxes on it, it's not unusual that they have to sell assets for less than market value.

Homosexual couples, buy term life insurance!

My usual recommendation for estate protection is to buy permanent life insurance (whole or universal). After all, estate protection is not a need that will expire before you do, so you want a guaranteed death benefit (whole life insurance guarantees one; universal life insurance can be managed to ensure one).

However, for homosexuals who are only protecting their estates because they can't marry their same-sex partners, the need for estate protection will likely disappear in a matter of years. Consequently, term life insurance is the right choice. It only lasts for a certain period of time, and it's much, much cheaper.

How will the need to protect your estate disappear? If the increasingly permissive attitudes toward errant sexuality are any indication, marriage laws will change, and you will be able to marry your same-sex partner. Therefore, you will share an estate in common, so your belongings will not be taxed if you should die and they pass to your partner.

Term life insurance policies are typically sold on terms of 5–30 years (you can also buy ART life insurance, whose term is only one year). There's no danger of locking yourself into a contract by buying a longer term than you need (you can just stop paying premiums and let the policy lapse, with no adverse consequences); however, policies of longer terms have higher premiums, so it's better to pick a term that coincides with your needs most exactly.

If you expect your state to institute same-sex marriages within the lifetime of a term life insurance policy, then go with term life insurance. Otherwise, a permanent policy may be the way to go.

Article by WholesaleInsurance.net writer Markham Anderson.

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