Practice Quiz

Health and Life Insurance

Category - Tax Issues

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Under which circumstances could the proceeds of a life insurance policy be included in the decedent's taxable estate?
  1. There is a transfer of ownership within three years of death (within certain guidelines)
  2. The decedent at his or her death possessed an incident of ownership in the policy
  3. The proceeds of the life insurance policy are paid to the executor of the decedent's estate
  4. All of the above
Explanation
Answer: D - There are many circumstances in which the proceeds of a life insurance policy could be included in a decedent's taxable estate. These may include having a transfer of ownership take place within three years of the insured's death (within certain guidelines). Likewise, proceeds could also be includable in the estate if the decedent held an incident of ownership in the life insurance policy, and/or if the proceeds of the life insurance policy are paid out to the decedent's executor.
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