Some affluent clients at or near retirement collect Social Security benefits they do not need to live on. Instead of letting those payments pile up in a checking account, they can redirect them into life insurance and turn a modest income stream into a meaningful legacy.
Key takeaways
- Unneeded Social Security income can be gifted to an ILIT to pay premiums on survivorship or single-life coverage.
- In one case, a couple’s net Social Security income of about $14,000 a year funded a survivorship policy of roughly $973,000.
- The strategy works best for insurable clients whose retirement income is already covered by other sources.
A couple netting about $14,000 a year in Social Security they didn’t need used it to fund nearly $1 million of survivorship coverage for their heirs.
Who this strategy fits
- Clients at or past Social Security claiming age with other income sources covering their lifestyle
- Couples who want to leave more to children or grandchildren
- Clients in reasonable health who can qualify for competitive rates
- Families interested in a trust-based legacy plan
It often pairs well with other income clients do not need, such as required minimum distributions. See our article on using RMDs in life insurance sales.
Case study: a couple redirects $14,000 a year
A 69-year-old man and his 65-year-old wife were receiving a combined $24,000 a year from Social Security that they did not need. After taxes, they were netting about $14,000.
After meeting with their advisor, they chose to gift $14,000 a year to an irrevocable life insurance trust. The trust purchased a survivorship universal life policy with a death benefit of about $973,000, payable to the trust for their children and grandchildren.
Premiums and death benefits depend on ages, health, product and current pricing, so any new case should be illustrated with today’s rates.
How the structure works
- The clients continue collecting Social Security as usual.
- Each year they gift the net amount to an ILIT, typically within annual exclusion limits.
- The trustee pays the policy premium.
- At the second death, the trust receives the death benefit income-tax-free and distributes it under the trust terms.
Survivorship coverage is often a cost-effective choice for married couples because it insures two lives and pays at the second death. For more on gift planning, see our article on lifetime gifting.
Presenting the choice to clients
For many clients the decision is simple: let unneeded income sit, or use it to build a lasting legacy. Our case design team can run survivorship and single-life illustrations so you can show clients exactly what their benefit could buy.
Frequently asked questions
Is Social Security income taxable?
Up to 85% of benefits can be subject to federal income tax depending on the client’s other income. The strategy typically uses the after-tax amount to fund premiums.
Why use survivorship life insurance?
It insures two people and pays at the second death, which often lines up with when an estate passes to heirs. It is usually less expensive than two separate policies.
Does the policy have to be owned by an ILIT?
No, but a trust keeps the death benefit out of the taxable estate and lets the clients set terms for how heirs receive the money.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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