Co-Founder, Coastal Financial Partners Group, California
The owner of a life insurance policy can be changed. The current owner would contact the agent or the insurance company directly to obtain a form to make the change.
In some cases the change may be a taxable transfer or gift of the policy from the current owner to the new owner. You would need to check with a life insurance professional and tax adviser to see if what you are planning to do might have unintended consequences.
Great question. The simple answer is Yes. Changing the owner to someone else is the same as giving them a "gift" of something that has value - usually considerable value!
Because of this, when you change the owner of the policy to someone else (including a trust), it is considered a gift...however, sometimes the intent to do this is to avoid inflating the estate value, and to negotiate the estate tax laws. It should be noted that if estate tax considerations are part of desire to change owners, according to current law, if the insured dies within three years of the change in ownership, the value of the life insurance policy will be "brought back" into the estate of the original owner and considered as part of the original owner's estate.
So, similar to most questions, the answer is Yes, the owner can be changed, but there are considerations to be taken in each situation.
Life insurance is personal property. Personal property has an owner. The ownership of a life insurance policy can be changed and only by the owner of the policy. In the case of permanent cash value policies there two tax items: policy basis and gain. Any change in the ownership could trigger a taxable event or a carry forward of basis. So it’s important to consider tax consequences of ownership change.
Yes, the owner of a life insurance policy has the right to transfer his/her ownership rights to another person, trust, or legal entity. The policy change of ownership form will need to be signed by the original owner and the new owner of the policy.
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In some cases the change may be a taxable transfer or gift of the policy from the current owner to the new owner. You would need to check with a life insurance professional and tax adviser to see if what you are planning to do might have unintended consequences.
Because of this, when you change the owner of the policy to someone else (including a trust), it is considered a gift...however, sometimes the intent to do this is to avoid inflating the estate value, and to negotiate the estate tax laws. It should be noted that if estate tax considerations are part of desire to change owners, according to current law, if the insured dies within three years of the change in ownership, the value of the life insurance policy will be "brought back" into the estate of the original owner and considered as part of the original owner's estate.
So, similar to most questions, the answer is Yes, the owner can be changed, but there are considerations to be taken in each situation.