Stuart A. Bronstein wrote:

- quote -

You assumed correctly. <grin
MTW

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"MTW" <mtwingcpa[at]yahoo.com> wrote:

- quote -

I assume you are using the term "belonged" as shorthand for,
"had an incident of ownership." A life insurance death
benefit will be included in someone's taxable estate if he
had an incident of ownership (e.g. the right to change
beneficiaries or to borrow on the policy) even if he was not
technically the owner.

- quote -

I can't argue with that. ;-)

Stu

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Dick Adams <rdadams[at]smart.net> wrote:
- quote -

Between spouses does it make a difference? Since spouses
have an unlimited marital deduction, I don't see how cross
ownership would change anything (other than for contingent
beneficiaries after one of the spouses has died, of course).

Stu

Moderator:
I believe we can agree that life insurance does not belong
in an estate and that all efforts to keep it out of an
estate is good professional practice.

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jcoggshall[at]comcast.net wrote:

- quote -

My quick guess would be that each beneficiary of the estate
would have to kick back their pro rata share of the tax.
However, I wouldn't be surprised if the IRS could pursue the
executor of the estate individually on this (without having
go after the beneficiaries in pro rata fashion).

Also, I am assuming that the life insurance policies in fact
"belonged" to the decedent. Note that there are
circumstances where such policies DON'T belong to the
deceased, and in those cases the proceeds are NOT included
in the estate.

Since there is a fair amount of potential tax liability at
stake, I would advise these people to obtain qualified
professional (probably legal) advice.

MTW

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jcoggshall[at]comcast.net wrote:

- quote -

The answer is very simple: It depends! And what it depends
on is who is the owner of the policy and then who is the
beneficiary.

I am the owner and beneficiary of my wife's life insurance
and she is the owner and beneficiary of mine. Owners who
are beneficiaries gets the proceeds outside of the estate
<period> .

The alternative beneficiaries also get the proceeds
outside of the estate. The problem occurs when there
are no alternative beneficiaries and there is no will.

Death and bankruptcy often occur simultaniously at the
same time (and that was deliberate).

Dick

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jcoggshall[at]comcast.net wrote:

- quote -

It may depend on state law. But in general I'd say that
each beneficiary should pay a proportionate share of the
taxes. So if the total tax is, say, $160,000, each of the
four should pay $40,000.

Stu

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Father has no assets in his name. Each of his three adult
children and new wife were beneficiaries of his life
insurance and each received $500K upon his death. As I
understand it, the estate is then valued at $2 million (life
insurance only Estate). How does the estate tax get paid if
there are no assets to pay it? Is the wife responsible for
it? Are the children supposed to pay for it out of their
insurance proceeds?

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