Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

Of avoiding the inclusion of life insurance proceeds

Customer Question
For purposes of avoiding the...
For purposes of avoiding the inclusion of life insurance proceeds in a decedent's gross estate may the decedent divest himself of all power over the policy, except the right to cancel the policy by ceasing to pay the premiums coming due thereby letting the policy lapse?
Submitted: 3 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 3 minutes by:
6/9/2015
Tax Professional: Robin D., Senior Tax Advisor 4 replied 3 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,380
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.

If you are the owner of the insurance policy, it will become a part of your taxable estate when you die.

You can either transfer the policy to someone else or put the policy into a trust. Once you transfer a policy to a trust or to someone else, you will no longer own the policy, which means you won't be able to change the beneficiary or exert control over it.

If your spouse is the beneficiary of your policy then it does not get included in the estate.

You should look under your MY QUESTIONS section. All questions you have posted are there with any responses too.

You can see one of your question by using this url:

http://www.justanswer.com/tax/92nte-client-s-home-built-1995-cost-1-100-000-burned.html

Ask Your Own Tax Question
Customer reply replied 3 years ago

You are somewhat off the mark when your answer tells me ' . . . if your spouse is the beneficiary of your policy then it does not get included in the estate.'

My question was purely one addressed to the issue of what is included in the decedent's 'gross estate' for estate and gift tax purposes. And there you go telling me - like I am a child of 10 years or else the village idiot that a life policy, purchased by the decedent, and over which the decedent retained complete control, including the right to change beneficiary (including by the way the right to change his wife as beneficiary), the death benefit would not be included in the decedents estate.

Perhaps you need to take a look at the instructions for IRS form 706. There you will find a first year law student's description of the consequences of the policy holder being able to exercise what are called 'incidents of ownership' over the life policy. These instructions, you appear to be completely unaware of.

I am not going to give you a poor rating, but I do not think the advice you gave here is worth the money charged.

Guess not many people have there gift and estate tax returns prepared by H & R Block.

Tax Professional: Robin D., Senior Tax Advisor 4 replied 3 years ago
There must have been an issue with the post. I am not certain why you merely received one line of the post.Thank you for your continued use of Just Answer and sincerely ***** ***** Support was able to assist you with your situation about seeing all your questions.
Ask Your Own Tax Question
Tax Professional: Barbara, Enrolled Agent replied 3 years ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,656
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
Verified
Different expert here – My name is ***** ***** please allow me to provide you with information that specifically addresses your initial question.
All policies should be listed on Schedule D of Form 706, whether or not they are includible in the gross estate for estate tax purposes. Include the same information as you would for any other policy, but do not include a value in the value column. In your description of this policy, explain why the policy is not includible.
If the decedent held any incidents of ownership in the insurance, it goes in the taxable estate. The IRS gives specific examples of the rights that count as incidents of ownership. These rights include:
The right to name and change the beneficiary;
The right to assign the policy to another or to revoke an assignment;
The right to surrender or cancel the policy;
The right to pledge the policy as collateral for a loan or to obtain a loan against the surrender value from the insurance company.
Based on the above, “the right to cancel the policy by ceasing to pay the premiums coming due thereby letting the policy lapse” would be an incident of ownership, and the policy would be included in the taxable estate.
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Barbara Your Own Question
Barbara
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,656
6,656 Satisfied Customers
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.

Barbara is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

18,380 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Can you right off a financial loss if you cancel a universal
can you right off a financial loss if you cancel a universal life policy that has a cash value, because the surrender rate is so high? … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
To be excluded from the decedent's gross estate, life
To be excluded from the decedent's gross estate, life insurance benefit proceeds payable to others must be from a life policy over which the decedent had at death no 'incidents of ownership . . .' Alt… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How can my sisters and I avoid going thru probate at the
How can my sisters and I avoid going thru probate at the death of our Mother who lives in Port St. Lucie, FL and none of us live in FL?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
my father has a universal insurance policy that he is the owner
my father has a universal insurance policy that he is the owner of and the beneficiary is a generation skipping trust that would be payable to a life insurance trust . upon his death are the proceeds … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Lane or Robin D If one has taken a permanent life insurance
Lane or Robin D If one has taken a permanent life insurance policy from usa where one initially contributes a premium of $6k for 7 years during one's stay in usa as permanent resident and policy keeps… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
In most cases, the death benefit of a life insurance policy
In most cases, the death benefit of a life insurance policy is not subject to taxation, unless it falls under the "transfer for value" rule. Does the "transfer for value" rule apply to charity-owned l… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Is there any way to avoid capital gains tax on the sale of
Is there any way to avoid capital gains tax on the sale of a house that was in an irrevoable trust where the Trustor only lived in the house 1 year out of the last five? For the last 4 years the house… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I had a Variable universal life Insurance policy for $125,000.
I had a Variable universal life Insurance policy for $125,000. and have paid over $50,000. in premiums over the life of this policy. My premium now requires that I pay $5,919. plus my regular payment … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
LIFE INSURANCE PROCEEDS PAYABLE TO THE TRUST OF THE DECEDENT,
LIFE INSURANCE PROCEEDS PAYABLE TO THE TRUST OF THE DECEDENT, IS IT INCLUDED ON THE OHIO ESTATE TAX RETURN? OR COULD IT BE EXCLUDABLE UNDER ORC 5731.12.… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Determine the gross income for the following cases: 1) Coral
Determine the gross income for the following cases: 1) Coral Corporation collected $1 million on a key life insurance policy when its chief executive died. The corporation had paid the premiums of the… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I was the Personal Representative for an Estate in Indiana
I was the Personal Representative for an Estate in Indiana that closed in 2007. There were several Insurance Benefit Policies in the name of the decedent that were not included in the Estate (this was… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
I have heard of an estate management method where a person
I have heard of an estate management method where a person buys a Universal life insurance policy with a lot of cash (e.g. uses $9 million in cash to buy a $10 million policy) and uses the tax exempti… read more
jgordosea
jgordosea
Enrolled Agent
Bachelor's Degree
2,885 satisfied customers
We used the step up marital deduction, 650 to 1000 to fund
We used the step up marital deduction, 650 to 1000 to fund a Life Insurance trust for estate tax planning, from 1999 to 2006 totaling 2m. or = to the marital deduction max in 2006. Now the two policie… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I bought a Term Life Policy in 1970, then contracted ...
I bought a Term Life Policy in 1970, then contracted MS. The policy was converted to Whole and was paid by a waiver of premium, which started in 1974. Can I be taxed for taking loans against the polic… read more
Christopher Phelps
Christopher Phelps
Sole Practitioner
Master Degree
1,180 satisfied customers
My father just passed away and left my mother 2 policies.
My father just passed away and left my mother 2 policies. One from the VA for $10,000.00 and one larger policy for $200,000.00. She is 76 and has always been a stay at home mother. She rents an apartm… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
For example If the gross Estate of a deceased is about ...
For example: If the gross Estate of a deceased is about 1,400,000.00 inclusive of the insurance policy worth $500,000.00 where after the deceased the contingent beneficiaries are his mother and sister… read more
Christopher Phelps
Christopher Phelps
Sole Practitioner
Master Degree
1,180 satisfied customers
My husband deceased last year. I do not have any kids. My ...
My husband deceased last year. I do not have any kids. My husband had a Life Insurance but his mother and sisters are the beneficaries. Will the Life Insuarnce amount be taken as part of his Estate In… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
If my spouse or I should die and we have only a will, ...
If my spouse or I should die and we have only a will, is probate required and will the 50% tax apply?… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x