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What is the income tax liability when a 20 year old "KEY MAN" life insurance policy ownership is transferred to the employee from the employer after retirement, and the employee has not paid any of the premiums on the policy.

Submitted: 59 days and 23 hours ago.

Category: Legal

Value: $38

Status: CLOSED

State/Country relating to Question: Illinois

Accepted Answer

You will realize an income gain on the net surrender value of the policy at the time of the transfer. What that means is that if you had to pay anything to get the policy transfered, etc..., then it would be the surrender value minus what you had to pay to get it, and also minus any surrender charges or outstanding loans against it.

The benefits of the insurance policy will remain tax free, because this type of transfer is an exception to the "transfer for value" rules that would otherwise make the benefits payable upon death taxable.

I hope this clears things up a bit. Good luck to you!

Accepts:
Expert:	ScottyMacEsq
Pos. Feedback:	100.0 %
Answered:	9/22/2009

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Licensed Texas General Practice Attorney

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What is the income tax liability when a 20 year old "KEY MAN" life insurance policy ownership is transferred to the employee from the employer after retirement, and the employee has not paid any of the premiums on the policy.

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State/Country relating to Question: Illinois

Accepted Answer

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