Assuming a person has a $1 Million (or even $2 Million) net worth, the argument I've heard is that the retiree (or near retiree) can take 1% of the investable portfolio and purchase life insurance; upon death, the life insurance death benefit (NOT TAXED) goes to pay the death taxes, thereby preserving the estate for the heirs (for a married couple, upon the death of the 'second-to-die' spouse).
For a married couple, since you don't know who the "second to die" will be, both of the married people need this type of retirement and estate planning.
Lastly, as you may be aware, the federal estate (death) tax is fully repealed in 2010 but then comes back "full blown" in 2011 with a 55% tax rate. If pending legislation for 2010 is approved, it may come back in 2010 with a $5 million exemption and a 35% tax rate. Obviously, if this latter bill is signed into law, my question above would pertain to those who are anticipating having more than $5 Million in taxable assets beyond the present day (since the date of death is unknown) and, yet, the amount of life insurance needed would slightly decrease since the estate (death) tax rate of 35% would not be as high as the 2009 rate of 45%.
http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States#Exemptions_and_tax_rates
Orignal From: Does it make sense to buy life insurance to pay high federal estate (death) taxes?
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