The Ownership of Life Insurance
The Ownership of Life Insurance
The Ownership of Life Insurance
The key to the role of life insurance in estate planning isthe matter of ownership of the policy. Before 1954, if youyourself paid the premium on a life insurance policy covering your life, the proceeds were includable in your estate, notwithstanding the fact that you might have transferred the ownership of the policy to another. The Internal Revenue Codeamendment of 1954 eliminated the "premium payment test"of includability of life insurance in the estate. It is nowpossible for a wife, for example, to be the owner of a lifeinsurance policy on her husband's life and even though her husband pays the premiums, the proceeds, at the death of thehusband will not be taxable as a part of his estate.
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This line of thought suggests that when you are next in themarket for life insurance, you should consider with your brokerhe may very well raise the question himselfwhether you or your wife should apply for the insurance on your life. It may also be advisable to review with your broker whether on any previously issued policies, ownership should be assigned to your wife. On the question of assignment of ownership, however, do not overlook the necessity of a gift tax ifpolicies with accumulated cash values of more than $6,000 are to be given in any one year. If such a gift is made, youmay be required to file a gift tax return and to pay a smallgift tax which in any event will be less than your estate tax.
The element of ownership of the policy is extremely important and may be quite costly to your heir. In one recent case apolicy which had been in force for two years and one month,matured on the untimely passing of the insured. The policywas in the amount of $200,000 and since it was made payableone-half to the insured's wife and one-half to the children, andwas owned by the insured himself, it was included in hisrather sizable estate. Instead of reciving $200,000 free andclear of taxes, the wife and children received approximately$150,000. The insured had paid high premiums for the benefit of the tax collector. Our discussion of trusts in the preceding chapter suggests the usefulness of the trust as a vehicle for theownership of life insurance. We also discussed arevocable trust, created largely for convenience of administration. Undersuch a trust, however, the insurance proceeds would be includable in the insured's estate if he had never given upownership of the life insurance policy. However, where the insured creates anirrevocable life insurance trust, the result isdifferent. Even though the insured pays the premiums, thetrust is the owner. At his death the proceeds are free of estatetaxes. Getting Term Life Insurance Quotes Online Looking For Life, Health Insurance In Wellington Benefits Of Using A Texas Life Insurance Agency Change Your Lifestyle For Permanent Weight Loss The Complicated but Excited Trip of Life Get Health Check-ups And Treatments To Maintain Your Health And Life Insurance Options Mens Designer Watches A Must For A Outward And Unique Expresion Of Lifestyle Hairloss Uk Lifestyle Vs. Hereditary Choices For Senior Life Insurance Ideal Lifestyle to Clear Acne Come And Celebrate Life With Colorado Assisted Living Facilities Lifespan And Life Expectancy Natural Hair Loss Treatment: Lifestyle And Dietary Changes That Prevent Further Hair Loss