Watch Transfers of Life Insurance Policies

Abstract

<p>Typically, the mention of transfers of life insurance policies in an estate planning context raises questions of whether the proceeds are (or will be) subject to federal estate tax<strong>1 </strong>or state inheritance or state estate tax, how insurance policies are handled in a trust or otherwise where the decedent-insured possessed fiduciary powers over the policy,<strong>2 </strong>or the treatment of split-dollar policies.<strong>3 </strong>However, the transfers of policies <em>during life </em>can encounter significant tax consequences as well. Those potential tax consequences are the focus of this article.</p>