TIP OF THE MONTH - November 2007
KEEPING INSURANCE ESTATE TAX FREE
One way of keeping insurance proceeds out of an estate where it may be subject to inheritance tax as high as 50%, is to give up all incidents of ownership in the policy and to have someone other than the estate, such as a trust, named as beneficiary. Often overlooked are group-term insurance or group permanent insurance policies provided by employers to employees or by associations to their members. To avoid this potentially costly mistake, examine these policies for beneficiary designations and for ownership. You should at least consider giving up your ownership interest in the policies and make sure that the beneficiary is someone other than your estate. Once the incidents of ownership in the policy are given up, the insured must survive for three years for the insurance to be excluded from the estate. For people past middle age, there may be some urgency here and you may wish to give us a call.