Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, July 25, 2013

Right to Receive Dividends Under Life Insurance Policy Not an Incident of Ownership


The IRS recently issued a private letter ruling concluding that a decedent does not possess an incident of ownership in life insurance policies insuring his life; this means insurance proceeds are not includible in the decedent’s gross estate under I.R.C. § 2042.

Under § 2042, “the value of a gross estate shall include the value of all property to the extent of the amount receivable by all beneficiaries under policies on a decedent’s life, with respect to which a decedent possessed any ‘incidents of ownership’ at the time of his death.”  In this ruling, a decedent was to maintain life insurance policies on his life for the benefit of his former spouse under a property settlement agreement; the dividends belonged to the decedent. 

The IRS ruled the executor mistakenly included the policies’ proceeds in the decedent’s gross estate.  This is because the policies’ dividends may have “belonged” to the decedent, but the “mere right” to the dividends was not itself an incident of ownership that would be included in the gross estate under § 2042.

See Dawn S. Markowitz, Right to Receive Insurance Policy Dividends, Wealth Management, July 23, 2013.


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