7 Advanced Estate Planning Strategies With Survivorship Life Insurance

Stacie Dobbe is a senior advanced planning attorney with Northwestern Mutual.

Everyone has their own unique legacy goals, which makes planning ahead such a personalized process. Some people focus on passing along values, while others have significant money and assets to help the next generation. Ideally, you combine both and share your assets in a way that’s financially strategic and aligned with your values. Survivorship life insurance can be a powerful tool here. This type of permanent life insurance policy covers two people, typically spouses or business partners, and pays out a death benefit after both individuals have passed away.

Survivorship life insurance is often purchased with estate planning in mind—and with good reason. It can help you plan for the future, support your beneficiaries and leave money to charitable organizations that are important to you. What’s more, your policy can accumulate a cash value that you could draw from for any reason. (If you opt for a type of policy called survivorship variable universal life insurance, you can potentially build more wealth since you could invest your premium in subaccounts which function similar to mutual funds.).

Here’s how you could use survivorship life insurance to strengthen your estate planning. Read about these seven different strategies; then talk them over with your financial advisor and your estate planning attorney.

1. Minimize estate tax

An Irrevocable Life Insurance Trust (ILIT) can be used to hold a survivorship insurance policy. The “irrevocable” aspect means that once it’s properly signed, the trust cannot be amended or changed. Using an ILIT has several benefits, including the ability to exclude the policy’s death benefit from your taxable estate. That could mean a larger inheritance for your heirs. In 2025, estates that are valued at more than $13.99 million for individuals (or $27.98 million for married couples) are subject to a federal estate tax. For 2026, that exemption limit will increase to $15 million per person.

Using an ILIT could keep a high-net-worth estate from becoming a taxable estate. And if there is a tax liability, the ILIT could provide cash to cover estate taxes and other expenses. Having a trust also offers more flexibility. For example, you can specify how and when the death benefit is to be used and provide instruction for minors or special-needs beneficiaries.

Another strategy unrelated to ILITs is borrowing against the cash value in your survivorship life insurance policy and gifting that cash to whomever you like during your lifetime. That amount would then be removed from your estate, reducing the value that could be taxed.

2. Plan for estate liquidity

Survivorship life insurance can provide much-needed financial peace of mind during a very difficult time for your family. It can help your family maintain their lifestyle after you and your spouse are gone without abruptly selling other assets or investments due to any outstanding debt or estate tax. The death benefit from your policy, which typically provides an immediate and tax-free lump sum, can ensure that your beneficiaries have enough liquidity to meet your final needs. Taking this route can help keep as much value in the estate as possible, which is a key part of preserving the wealth you’ve worked so hard to build.

3. Equalize the inheritance for beneficiaries

You may want your surviving heirs to receive an equal share of your assets, but that could be tricky. Some assets are difficult to divide equally, like a family business or a unique piece of property. If you have a survivorship life insurance policy, your death benefit can be used to balance things out. This strategy, described below, is known as “equalization.”

Let’s say you have a family beach house. Splitting it evenly between your two adult children could require them to alternate weekends or agree on the best time to sell it and which offer to accept. Instead, you could give the house to the child most likely to cherish it and provide a death benefit of equal value to the other child. The death benefit would be the proceeds of the survivorship life insurance. In the end, both children get a significant inheritance according to their preferences and needs while maintaining balance in the total value of assets each child receives. 

4. Fund business continuity

Survivorship life insurance can be especially valuable if you own a business either on your own or with your spouse. You’ll want to ensure that your business has financial stability during a change of ownership. A survivorship policy can help.

The death benefit could go toward a buy-sell agreement, which can set the stage for a smooth transfer of ownership. Here’s an example: After the second policyowner’s death, the death benefit should be split evenly between their heirs. If one of them is interested in stepping in and running the business, they could use their share of the proceeds to buy out the others, all without disrupting business continuity.

And as mentioned earlier, you could also take out this type of joint life insurance policy with a business partner. When the second partner dies, their heirs would get the death benefit and could use it to keep the business going. For example, the money could pay an interim executive to oversee a transition, fund a new location or cover franchise fees.

5. Leave a legacy to charity

If there’s a charity that’s close to your heart, you and your spouse could name it as a beneficiary on your survivorship life insurance policy. The death benefit will not count as taxable income, which could allow you to give a larger gift than you otherwise would. It will also be considered a tax-deductible charitable contribution, which could help reduce the likelihood of your estate being taxed.

6. Plan for an heir with special needs

Proceeds from a survivorship life insurance policy can also be used to fund a special-needs trust. This type of trust allows you to set aside funds specifically for someone with special needs but in a way that won’t impact their ability to qualify for Medicaid and other government benefits like Supplemental Security Income. (These benefits may be limited if they have too many assets in their name.) Funds in a special-needs trust can be used after you pass away to cover education costs, out-of-pocket medical expenses, entertainment, travel and more.

7. Borrow against survivorship policies to fund your estate plan

Permanent life insurance is unique in that it accumulates a cash value over time that you can borrow against for virtually any reason. That includes funding your estate plan. You could use a life insurance loan to:

• Gift money to your heirs, up to the exclusion limit: in 2025, that’s $19,000 per recipient. An added bonus is that the gift will also reduce the value of your estate.
• Fund trusts: That could be an ILIT, special needs trust or other type of trust. As mentioned earlier, an ILIT can hold assets outside of your taxable estate.
• Pay for additional life insurance premiums: Having more than one life insurance policy can provide extra financial security by increasing the total death benefit for your beneficiaries. You could also borrow against your cash value to buy final expense insurance.

Just be aware that taking out a life insurance loan will reduce your death benefit until you repay the amount borrowed.

Survivorship life insurance can be a valuable estate planning tool. Your Northwestern Mutual financial advisor will answer questions and help you strategize so you can build a strong estate plan. Together, you can review your financial situation and legacy goals to come up with a plan that feels right for you and your spouse.

This article is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.