What life insurance policy would be most suitable for Shabhana and Ravi to cover capital gains taxes on the cottage?

A joint life last-to-die policy is most suitable for Shabhana and Ravi to cover capital gains taxes on the cottage because it provides a death benefit that is paid out after the death of the second insured individual. This means that the cash benefit from the policy can be used to cover any tax liabilities that may arise from capital gains upon the death of the surviving spouse.

In the case of jointly held assets, such as a cottage, the value can increase significantly over time, leading to potential capital gains that would be subject to taxes when the last surviving owner passes away. A last-to-die policy specifically addresses this situation by ensuring that the necessary funds are available upon the death of the second spouse, thus helping to minimize the financial burden of taxes on their estate.

Other policy types would not be as effective in this particular scenario. A joint life first-to-die policy would provide a benefit upon the first death, which might leave the surviving spouse without coverage for taxes incurred after their passing. Separate policies on either spouse's life would not collectively cover the capital gains taxes upon the death of the last individual. Therefore, the joint life last-to-die policy perfectly aligns with the need to address potential tax liabilities that would occur when both partners have passed