Joint Last to Die Policies: The Ultimate Estate Planning Solution for Couples

The best estate planning solution for couples in Canada!

19 minute read
Originally published: February 13, 2023

Joint Last to Die Policies: The Ultimate Estate Planning Solution for Couples

Joint Last to Die Policies: The Ultimate Estate Planning Solution for Couples

Thinking of gifting your life insurance to a charity? Learn all you need to know here!

17 minute read
Originally published: February 13, 2023

Joint Last to Die Policies: The Ultimate Estate Planning Solution for Couples

Life insurance is an important component of estate planning for many couples. It provides financial security for loved ones in the event of the policyholder’s death. While traditional life insurance policies are a good choice for some, others may benefit more from Joint Last to Die policies. Joint Last to Die policies provide coverage for two people, with the death benefit being paid out after the last death. This type of policy offers several benefits, including cost savings compared to individual policies and the ability to better protect your estate. In this blog, we will explore the world of Joint Last to Die policies, including their benefits, considerations, and alternatives. Whether you’re just starting to think about estate planning or you’re an experienced policyholder, this guide will help you understand how Joint Last to Die policies can help protect your loved ones and your estate.

Introduction to Joint Last to Die policies

Meet the Smiths, a retired couple who wanted to ensure their estate would be protected for their children and grandchildren. After careful consideration, they discovered joint last to die insurance, also known as survivorship life insurance. This type of policy, which covers both individuals and pays out a death benefit upon the second individual’s death, offered the protection the Smiths were looking for at a lower cost than two separate life insurance policies. By choosing joint last to die insurance, the Smiths were able to achieve their estate planning goals and secure a financially stable future for their family.

Joint last to die policy

What are Joint Last to Die policies?

Joint last to die insurance, also known as survivorship life insurance, is a type of life insurance policy that covers two individuals and pays out a death benefit upon the second individual’s death. This type of policy is often used by couples or business partners as an estate planning tool.

One of the key advantages of joint last to die insurance is that it is usually less expensive than two individual life insurance policies. This makes it a cost-effective option for those looking to protect their estate. Additionally, the death benefit from the policy can be used to pay for expenses such as funeral costs, estate taxes, or outstanding debts.

Joint last to die insurance is also a popular option for those who want to ensure their wealth will be passed on to their beneficiaries. The death benefit from the policy can be used to support their heirs and provide a legacy for future generations.

It is important to keep in mind that joint last to die insurance only pays out a death benefit upon the second individual’s death. This means that if one of the individuals passes away, the policy will not provide any immediate financial support for their family.

Overall, joint last to die insurance can be a useful estate planning tool for those looking for a cost-effective way to protect their estate and ensure their wealth will be passed on to their beneficiaries. It is important to carefully consider your goals and budget when deciding if this type of policy is right for you.

Why are Joint Last to Die policies used?

Joint last to die policies are used primarily as an estate planning tool. Couples or business partners often use these policies to ensure that their estate will be protected and their financial goals will be met, even if one of them passes away first. The policy is usually less expensive than two individual life insurance policies, making it a cost-effective option for those looking for estate planning solutions.

The death benefit from the policy can be used to pay for expenses such as funeral costs, estate taxes, or outstanding debts. This makes joint last to die insurance an attractive option for those who want to ensure their wealth will be passed on to their beneficiaries.

Additionally, joint last to die policies can provide peace of mind for the policyholders, knowing that their estate will be protected even if one of them passes away first.

Benefits of Joint Last to Die Policies

Joint last to die insurance provides several benefits, making it an attractive option for those looking to protect their estate and ensure their financial goals are met.

Benefits of Joint Last to Die Policies

Some of the key benefits of joint last to die policies include:

Cost-effective: Joint last to die insurance is usually less expensive than two individual life insurance policies, making it a cost-effective option for those looking to protect their estate.

Estate protection: The death benefit from the policy can be used to pay for expenses such as funeral costs, estate taxes, or outstanding debts, helping to ensure that the policyholder’s estate will be protected.

Legacy creation: The death benefit from the policy can also be used to support the policyholder’s heirs and provide a legacy for future generations, making it an attractive option for those who want to ensure their wealth will be passed on to their beneficiaries.

Peace of mind: Knowing that their estate will be protected even if one of them passes away first can provide peace of mind for the policyholders.

One policy for two people: Instead of having to purchase two separate life insurance policies, joint last to die insurance covers both individuals with one policy, making it a convenient and streamlined solution.

Flexibility: Joint last to die policies can be customized to meet the needs and goals of the policyholders, making it a flexible and adaptable option.

Cost of Joint Last to Die Compared to Individual Policies

Joint last to die insurance is often more cost-effective than two individual life insurance policies, making it an attractive option for those looking to protect their estate while also fitting within their budget.

The cost savings associated with joint last to die insurance is due to the fact that it covers two individuals with one policy, rather than two separate policies. This means that the insurance company is assuming less risk, which typically results in lower premiums. The premium for a joint last to die policy is usually lower than the combined cost of two individual policies, making it a more affordable option for many people.

It is important to note that the cost savings of a joint last to die policy will vary based on factors such as the age and health of the policyholders, the coverage amount, and the policy term. It is best to compare the cost of a joint last to die policy with the cost of two individual policies to determine which option is more affordable for your specific needs.

Another factor to consider is that joint last to die insurance is a long-term policy that only pays out a death benefit upon the second individual’s death. This means that it may not be the best option for those who need immediate financial support. However, for those who are looking for a cost-effective way to protect their estate and ensure their financial goals are met, joint last to die insurance can be a smart choice.

Joint Last to Die Compared to Term Life Insurance

When compared to term life insurance, joint last to die insurance is typically more expensive, but it provides a death benefit that lasts for the lifetime of the last surviving policyholder. Term life insurance provides coverage for a specific term, usually 10, 20, or 30 years, and does not build up cash value.

Joint Last to Die Compared to Whole Life Insurance

When compared to whole life insurance, joint last to die insurance is usually less expensive, but it provides a death benefit that lasts for the lifetime of the last surviving policyholder, rather than providing coverage for the lifetime of the policyholder. Whole life insurance typically provides a death benefit, as well as a cash value component that builds up over time.

How Joint Last to Die Policies Work?

Compared to purchasing two separate individual life insurance policies, Joint Last to Die life insurance policies are a single life insurance policy that covers two people but only provides a death benefit when the last surviving insured individual passes away. These policies are often purchased by married couples as a way to provide financial support for the surviving beneficiaries such as children, after the death of both partners.

The premiums for Joint Last to Die policies are typically lower than if two individual life insurance policies were purchased, as the insurer is taking on less risk by covering the deaths of two individuals. The death benefit is paid out tax-free to the beneficiaries and can be used for a variety of purposes, such as covering final expenses, paying off debts, or providing an income stream.

It is important to note that these policies do not have a cash value component, meaning policyholders cannot borrow against the policy or receive any money while both individuals are still alive. Additionally, these policies have a survivorship clause, which requires that both insured individuals must die before the death benefit can be paid out.

Joint Last to Die policies can be a good option for married couples looking to provide financial security for their beneficiaries after both partners have passed away and who do not require access to the death benefit prior to that time. These policies offer a cost-effective way to achieve this goal.

When Joint Last to Die policies are a good choice

Joint last to die policies are a good choice for some depending on the circumstances, this being said there are also some different goals depending on the individuals being insured. Couples will have certain goals while business partners will have other goals. Let’s take a look at both of the pros for these two different situations. 

Joint Last to Die for Couples

Joint Last to Die life insurance policies can be a good option for married couples who want to provide financial security for each other after both partners have passed away, and who do not require access to the death benefit prior to that time. By offering a cost-effective way to achieve this goal and providing a tax-free death benefit to beneficiaries, Joint Last to Die policies can help couples achieve their financial goals.

Joint Last to Die for Business Partners

Joint Last to Die life insurance policies can also be a useful tool for business partners who want to provide financial security for each other and for the business in the event of the partner’s death. This policy can allow for the business to continue well after the death of the two owners. 

If business partners want to ensure that their surviving beneficiaries and other business partners will have sufficient funds to cover outstanding debts or final expenses, a Joint Last to Die policy can provide peace of mind to two individuals. 

What to Consider when Choosing a Joint Last to Die Policy?

Choosing a Joint Last to Die life insurance policy requires careful consideration of the purpose of the policy, the premiums and coverage amounts, the ages and health of the individuals, and the options for receiving the death benefit. By considering these factors and working with a knowledgeable insurance agent or financial advisor, individuals can choose a policy that meets their specific needs and goals.

What to Consider when Choosing a Joint Last to Die Policy

When choosing a Joint Last to Die (JLTD) life insurance policy, it is important to consider the following factors:

Purpose: What is the primary goal of the JLTD policy? Is it to provide financial security for a beneficiary, or provide funds for a business in the event of both of the partner’s death? Answering this question will help determine the amount of coverage needed and the type of policy that is best suited to meet those goals.

Premiums: Joint Last to Die policies often have lower premiums than two individual life insurance policies, but it is important to compare quotes from multiple insurers to determine the best value for the amount of coverage desired. This is why you should contact a life insurance brokers to find out your options

Age and health: Both partners’ ages and health conditions will be taken into consideration when determining the premium for the policy. The older and less healthy the individuals are, the higher the premium is likely to be.

Coverage amounts: It is important to determine the amount of coverage needed to meet the goals of the JLTD policy. This may involve an analysis of current and future expenses, debts, and other financial obligations.

Death benefit payment options: Consider the options available for receiving the death benefit, such as a lump sum payment, installment payments, or a combination of both.

Tax implications: Joint Last to Die policies typically provide a tax-free death benefit to beneficiaries, but it is important to consider any potential tax implications when choosing a policy.

Risks and drawbacks of Joint Last to Die policies

Like any financial product, Joint Last to Die (JLTD) life insurance policies have risks and drawbacks that should be carefully considered. Some of these include:

Lack of access to death benefit: Since JLTD policies do not have a cash value component, policyholders cannot borrow against the policy or receive any money while both individuals are still alive. This means that if one partner needs access to funds for unexpected expenses, they cannot receive money from the JLTD policy.

Increased risk: With a JLTD policy, the death benefit is not paid out until the death of the last surviving individual. This means that if one partner dies before the other, the death benefit is not paid out, and the surviving partner must continue paying the premiums.

Premium increases: Over time, the premiums for a JLTD policy can increase, making it more difficult to maintain coverage. This can be particularly challenging for individuals on a fixed income or those who are facing financial difficulties.

Complexity: JLTD policies can be complex and difficult to understand, which can make it challenging for individuals to make informed decisions about coverage.

Limitations on coverage: JLTD policies often have limitations on the amount of coverage that is available, and the coverage may not be sufficient to meet the needs of all individuals.

Joint Last to Die life insurance policies have some risks and drawbacks that should be carefully considered before choosing this type of coverage. Individuals should carefully weigh the risks and drawbacks against their specific needs and goals.

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Alternatives to Joint Last to Die policies

Joint Last to Die (JLTD) life insurance is just one type of life insurance available to individuals. Alternative options include:

Term life insurance: Term life insurance is a type of life insurance that provides coverage for a specified period of time, usually ranging from one to thirty years. If the policyholder dies during the term of the policy, the death benefit is paid out to the beneficiaries. Term life insurance policies are often less expensive than other types of life insurance, making them an attractive option for individuals who are looking for a cost-effective way to provide financial security for their loved ones.

Whole life insurance: Whole life insurance is a type of permanent life insurance that provides coverage for the policyholder’s entire lifetime. Unlike term life insurance, whole life insurance policies build up cash value over time, which can be borrowed against or used to pay premiums. Whole life insurance policies are typically more expensive than term life insurance policies, but they provide more flexibility and longer-term financial security.

First to die joint life insurance: First to die joint life insurance is a type of joint life insurance policy that provides coverage for two individuals. If either individual dies, the death benefit is paid out, and the policy is cancelled. This type of policy is typically less expensive than Joint Last to Die policies and is an attractive option for individuals who are looking for a cost-effective way to provide financial security for a surviving spouse or partner.

Joint Last to Die policies provide a cost-effective way to provide financial security for a surviving spouse or partner, but there are alternative options, including term life insurance, whole life insurance, and first to die joint life insurance, that may also meet those needs. By considering the benefits and drawbacks of each type of policy and working with a knowledgeable insurance agent or financial advisor, individuals can choose the life insurance policy that is best suited to meet their specific needs and goals.

Other Estate Planning Options

In addition to life insurance, there are several other estate planning options that individuals can consider to help ensure the financial security of their loved ones. Some of these include:

Wills: A will is a legal document that outlines an individual’s wishes regarding the distribution of their assets upon death. A will can also appoint an executor to manage the estate and guardians for any minor children.

Trusts: Trusts are legal arrangements that allow an individual to control the distribution of their assets after death. Trusts can be structured in a variety of ways to achieve specific goals, such as minimizing taxes, providing for a surviving spouse or children, or establishing a legacy.

Power of Attorney: A power of attorney is a legal document that gives another individual the authority to manage an individual’s financial affairs in the event that they become unable to do so. This can include managing bank accounts, making investment decisions, and paying bills.

Estate planning is an important aspect of financial planning that can help individuals ensure the financial security of their loved ones and provide peace of mind. In addition to life insurance, there are several other estate planning options which are right for you, talk to a financial planner to find out more!

Conclusion: Joint Last to Die Policies

Joint Last to Die (JLTD) life insurance policies are a type of joint life insurance that provide financial security for a surviving spouse or partner. These policies pay out a death benefit when the last of two policyholders passes away. JLTD policies are often less expensive than individual life insurance policies, making them an attractive option for individuals who are looking for a cost-effective way to provide financial security for their loved ones.

However, JLTD policies also have certain drawbacks and limitations, such as the fact that the policy may not provide financial support to the surviving spouse or partner until the death of the second policyholder. It is important to carefully consider the benefits and drawbacks of JLTD policies and alternative estate planning options, such as term life insurance, whole life insurance, and first to die joint life insurance, before making a decision.

Estate planning is an important aspect of financial planning that can help individuals ensure the financial security of their loved ones and provide peace of mind. In addition to life insurance, there are several other estate planning options, including wills, trusts, power of attorney, and advance medical directives, that individuals can consider to help achieve their specific goals. By working with a knowledgeable insurance agent or financial advisor, individuals can create a comprehensive estate plan that is tailored to meet their specific needs and goals.

It is important to consider all available options and take the time to carefully evaluate the potential benefits and drawbacks of each before making a decision. By taking an informed approach to estate planning and life insurance, individuals can help ensure the financial security of their loved ones and provide peace of mind for themselves. Contact our team of life insurance brokers or financial planners to find out your needs and to find the right option to protect yourself, your family and your estate.

Frequently Asked Questions (FAQs) about Joint Last to Die policies

A joint last to die policy is a type of life insurance that provides coverage for two individuals, usually spouses or business partners, with the death benefit paid out only upon the death of the last surviving partner/individual.

In a joint last to die policy, both individuals are insured and the policy remains in force until the death of the second insured person. The death benefit is paid out to the beneficiary upon the death of the second insured person.

Benefits of a joint last to die policy in Canada include lower premiums compared to two individual policies, the convenience of having a single policy for both individuals, and the guarantee that the death benefit will be paid out.

Joint last to die policies are typically purchased by married couples or common-law partners in Canada but many business owners or even family members purchase these policies sometimes.

Yes, the coverage amount and beneficiaries can be changed on a joint last to die policy in Canada, subject to the terms and conditions of the policy and the insurance company’s approval.

A joint last to die policy can be a good option for estate planning in Canada as it can provide funds to pay estate taxes and other expenses upon the death of the last surviving individual. However, it’s recommended to consult our financial advisors and life insurance brokers to determine if it’s the right option for your individual needs and circumstances.

Yes, a joint last to die policy in Canada can be cancelled or lapsed if the premiums are not paid, subject to the terms and conditions of the policy and the insurance company’s rules.

No, a joint last to die policy does not pay out if one of the individuals insured dies first. The death benefit is paid out only upon the death of the second insured person.

The death benefit from a joint last to die policy in Canada can be used for any purpose, as determined by the policy’s beneficiary. However, there may be tax implications to consider.

It depends on the insurance company and the amount of coverage being applied for. Some insurance companies may require a medical exam, while others may not. It’s best to check with a life insurance broker to understand the specific requirements of the policy.

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Now that you have read our blog on Joint Last to Die Policies: The Ultimate Estate Planning Solution for Couples, it is worth looking into your options and how you can protect your finances and your loved ones. At Protect Your Wealth, we’ve been providing expert advice for all types of life insurance, and retirement and investing planning, since 2007. As your Life Insurance broker and financial planner, we work with you to create a personalized plan for your family or business that covers and meets your needs.

To schedule a consultation about your investment goals, or if you have any questions about insurance in Ontario or Canada, please contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia and Alberta  including areas such as Kitchener, Red Deer, Calgary, and Vancouver

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