Co-Founder, Coastal Financial Partners Group, California
Yes, the policy owner has the right to transfer the policy to another owner. Care would have to be taken to ensure it is done without adverse tax consequences. We have often seen policy owners simply make the change directly with the insurance company only to find out later that the result was taxable.
Depending on the facts and circumstances, the transfer itself can be taxable to the extend of gain and in many cases, a transfer might result in the death benefit being taxable when received. There are several ways that a transfer might be arranged such as by gift or sale. There are IRS regulations which set the value of the policy for tax purposes.
Life insurance, tax and legal professionals can help you assess your situation to avoid traps so plan ahead before making changes.
If by transfer, you mean the changing of ownership, be advised of the potential taxable event if there is gain the policy. Order an in force ledger and have it reviewed in tandem with the original policy and the last annual policy statement. Having an insurance and tax professional review these documents can assist you in determining the economic viability of the transfer.
If by transfer you mean, exchanging the present policy under the 1035 rules for a new policy without changing ownership or the insured, you can do that. Whether you should that or not is another question. Seek out an insurance and tax professional before moving forward with a transfer or exchange. We can help with that.
.JPG){kind=avatar}
Depending on the facts and circumstances, the transfer itself can be taxable to the extend of gain and in many cases, a transfer might result in the death benefit being taxable when received. There are several ways that a transfer might be arranged such as by gift or sale. There are IRS regulations which set the value of the policy for tax purposes.
Life insurance, tax and legal professionals can help you assess your situation to avoid traps so plan ahead before making changes.
If by transfer you mean, exchanging the present policy under the 1035 rules for a new policy without changing ownership or the insured, you can do that. Whether you should that or not is another question. Seek out an insurance and tax professional before moving forward with a transfer or exchange. We can help with that.