Mec and Owner Dies

[Life]

If the owner of a whole life policy dies...and not the insured will the successor owner have any tax consequences?


Thanks...

 

[scagnt83]

Very good question.... probably is state specific to an extent (community property vs. non, who the new owner is, etc.)

It seems that the CV could be considered income...

 

[Life]

I know if you gift it you will need a gift tax form, but I am not sure if the owner dies.

I cant believe all these life sales people don't know the answer?

 

[Jerard]

I would think ownership would transfer to the insured. Now if the insured is a child then hmmmmm.

 

[scottstreet]

Jerard, why would ownership transfer to the insured? The policy is an asset that will transfer to where it is directed to by instrument or probate.

 

[Jerard]

Jerard, why would ownership transfer to the insured? The policy is an asset that will transfer to where it is directed to by instrument or probate.

You're right. For most companies it would go to the estate.

I called one of my companies at random (RNA) and he confirmed that. In the event that you have the owner that is different than the insured I would create transfer of ownership form listing someone else. If signed by the owner companies would honor that.

Great...one more form I have to make.

 

[Life]

this is what i found out so far...."There are two situations that unknowingly can trigger tax for a MEC. First, a pledge of a MEC as security for
a loan is treated as a taxable distribution. Second, an assignment of a MEC is
treated as a distribution. In this regard a change of ownership, even by gift,
is an assignment of a policy and will subject the owner/donor to income tax.
Clearly, MEC tax application is broad reaching.

So i now know if i change the owner its a taxable event for a mec...but what if its because a succesor owner from death?...do they get hit with a taxable event ?

 

[blue_wynd]

Call the irs and ask? Straight to the source is always good.

 

[Life]

I have been trying to get in touch with IRS for weeks..