For large estates, it is generally advisable to keep life insurance proceeds out of your taxable estates (and if married, your spouse's). A common life insurance mistake made by affluent people is to leave their spouses as owners or beneficiaries of life insurance. This error can increase the gross estate and ultimately increase the amount of estate taxes due.

If your estate is large enough (over $1.3 million in a properly planned estate), there will be estate taxes payable after you and your spouse die. Consider keeping your insurance proceeds out of your estate as long as your spouse does not need the insurance proceeds to survive after your death. However, if your spouse needs money to provide for family income or needs, then it is wise to make your spouse the beneficiary of your life insurance. Having spouses be the owner of each other's policies (cross ownership) is unnecessary.

Additional Information on Estate Planning:

Estate Planning Overview
Irrevocable Life Insurance Trusts (ILITS)
Using Ownership and Beneficiary Designations
How to Get Existing Policies Out of my Estate
Can the Three-Year Rule be Avoided?
Second to Die Life (Survivorship) Insurance
Gifts - Overview
Leveraging Your Gifting Program
Grandchildren
Generation Skipping
Living Trusts
Credit Bypass Trust
Charitable Remainder Trusts
Avoid Capital Gains Income for life

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