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It is not deemed as income, is not subject to required minimum distributions, and will not affect taxation on social security if in a life insurance policy. Death benefits are tax-free as well.
As a parent or grandparent, you can leave a legacy by using the magic of compound interest.
Like all scary stories, mine opens peacefully. You and your spouse are enjoying your retirement. Your health is good, and you are doing all the things you dreamed of together. Then, suddenly and tragically, you lose your spouse. As you struggle to deal with your grief, the next trauma comes. You discover that the documents you signed several years ago when your spouse retired don't have a loophole, and in addition to losing your spouse, you've also lost a substantial portion of your income.