Comments on: Who Should Own Your Life Insurance Policy?

By: Paul Williams

Paul Williams — Tue, 24 Jan 2012 18:23:00 +0000

Without knowing more about the situation, I can only give a guess. But my guess is that you should not have any adverse income tax consequences. The change of ownership may be considered a gift, but that would simply mean your aunt would use up some of her gift exclusion if the value of the policy is more than $13,000.

By: Rcerminaro

Rcerminaro — Tue, 24 Jan 2012 14:20:00 +0000

My 87-year old aunt has a insurance policy, a modified endowment contract. I am the beneficiary, and the insurance company has suggested that I now become the owner of the policy. Will that change in ownership to me have an adverse affect on my income taxes?

By: Paul Williams

Paul Williams — Fri, 19 Mar 2010 19:55:20 +0000

Thanks for your question, Jimmy. The tax liens will not affect the life insurance proceeds. Those assets only come into play after his death and they go directly to you and your mom. As long as your mom is not also liable for the back taxes, then the government will not take the life insurance money. For more information, you can check out this article by a tax attorney: http://www.unclefed.com/AuthorsRow/BJHaynes/liens1.html

Hope that helps!!

By: jimmy

jimmy — Fri, 19 Mar 2010 03:58:06 +0000

My dad owes state and federal liens on back taxes, his only assest is a term life insurance policy. My mom and I are beneficary,if he dies does the policy automatically go towards the taxes,about 30,000.00 dollars,or to us, he only has the policy to pay for his funeral incase something happens to him.
thanks.

By: Paul Williams

Paul Williams — Mon, 01 Feb 2010 16:18:08 +0000

Thanks for your question, Ursula. A life insurance policy is an asset just like anything else you can own. So unless you have set up a “contingent owner” on your policy (a person designated to become the new owner if the original owner dies), then ownership of a life insurance policy will pass according to your will. (at least in the situation you’ve given where it’s a policy owned on someone else’s life – not the person who died)

By: Ursula Alderman

Ursula Alderman — Sat, 30 Jan 2010 00:45:25 +0000

If a spouse is the owner and beneficiary, but that person dies before the one whose life is insured, what happens to the policy? Can the living spouse get it back if the one who dies has a will leaving it to the other?

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