Partner, Waterway Financial Group, Myrtle Beach, SC
There are many different possibilities when considering ownership of life insurance.
Parent/Guardian--if a child is not yet of legal age, a parent or guardian could be an owner of the policy.
Self--the primary insured could also be the owner, and this is quite often the case of most adults.
Spouse--the spouse could be the owner and also the beneficiary of a policy on their spouse. This allows for complete control of the policy, so in the event of something like divorce, the insurance could remain in force without the ex changing beneficiaries.
Trust--there are different types of trusts which could be an owner of a life insurance policy. For example, an ILIT (irrevocable life insurance trust) could own a policy for estate settling purposes, so it wouldn't be altered by anyone while the primary insured is still living. Also, a trust is common for minors.
Business--a business might be the owner of a policy on it's owners in a Buy/Sell agreement.
Business Owner--the owner may be owner of a Key Man policy.
Interested Party--any other person who might have some sort of insurable interest on someone could be an owner. For example, if a person took a loan from an entity, the entity could have insurance on the borrower, to ensure they get their money back should the borrower pass prematurely.
There are many situations in which the ownership of a life insurance policy could differ. Each situation is unique.
Life insurance should be owned by anyone with a family or business, which has any current financial liabilities, future obligations or wants to make a difference through legacy or charitable giving. Permanent life insurance should be owned by anyone who is seeking tax advantaged supplemental retirement income that has a long term commitment to keep the permanent life insurance policy in force for the life of the insured.
If life insurance is for estate purposes, it should be owned by a trust. If the life insurance is in a pension plan, it is own by the company trustee. If life insurance is part of Captive Insurance planning, then it could be owned by an outside entity or it could be owned by the Captive. If the life insurance is for business purposes, then either the business or a combination of the business and the insured are usually the owners/joint owners of the policy. Sometimes a trust will own those policies as well. For life insurance between husband and wife, ownership always depends on individual circumstance.
There are a lot of things to consider when naming the owner of a life insurance policy. The most common is the insured, which is usually the payer as well. The next to be named owner would be the payer if they are different than the insured. If a company is paying for a buy/sell life insurance policy or key man, then the company should be the owner of the policy. Finally, if the insured is disabled, incapacitated or elderly in bad health a care giver or guardian should be the owner of the policy.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
The owner of the policy is in control of the policy. The policy is the property of the owner. The owner need not be the insured. The owner can name the beneficiary. The owner need not be a natural person but can be a trust. There are situations where certain portions of the death proceeds can be included in the estate of the deceased for estate tax purposes. To avoid this ownership is often placed with another party or trust. It is also possible that the owner might be required to act when the insured is not capable.
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Parent/Guardian--if a child is not yet of legal age, a parent or guardian could be an owner of the policy.
Self--the primary insured could also be the owner, and this is quite often the case of most adults.
Spouse--the spouse could be the owner and also the beneficiary of a policy on their spouse. This allows for complete control of the policy, so in the event of something like divorce, the insurance could remain in force without the ex changing beneficiaries.
Trust--there are different types of trusts which could be an owner of a life insurance policy. For example, an ILIT (irrevocable life insurance trust) could own a policy for estate settling purposes, so it wouldn't be altered by anyone while the primary insured is still living. Also, a trust is common for minors.
Business--a business might be the owner of a policy on it's owners in a Buy/Sell agreement.
Business Owner--the owner may be owner of a Key Man policy.
Interested Party--any other person who might have some sort of insurable interest on someone could be an owner. For example, if a person took a loan from an entity, the entity could have insurance on the borrower, to ensure they get their money back should the borrower pass prematurely.
There are many situations in which the ownership of a life insurance policy could differ. Each situation is unique.