Orange County California

Trust Attorneys


Creating an estate plan should involve a careful consideration of all of the assets of your estate and the overall goals that you have for passing these assets to your loved ones. If your estate is large enough to trigger a possible estate tax, it may be a personal goal to minimize the size of that tax. Those who wish to create a plan that reduces potential estate taxes will need to analyze existing value of your life insurance policies to determine if the value of the proceeds of these policies are includable in the gross value of the estate.

For purposes of calculating the potential value of your estate, the proceeds of your life insurance policy will be included if any of the following are true:

  • You possessed an incident of ownership over the life insurance policy at the time of your death.
  • The proceeds of your life insurance policy were made payable to the executor of your estate or were payable to the executor because your beneficiary designation was blank or invalid.
  • You transferred ownership of the policy to a trust or to an individual within the last the three years prior to your death.

If you are trying to assess whether you possess any incidents of ownership over your life insurance policy, consider the following questions:

  • Can you assign the life insurance policy to someone else?
  • Can you terminate the life insurance policy?
  • Can you name the beneficiary of the life insurance policy?
  • Can you borrow against the cash reserves of the policy?
  • Can you make changes to the beneficiary designation of the policy?

Fortunately, life insurance policy proceeds are typically not subject to an income tax to the beneficiaries who receive these benefits. Estate planning should involve a careful review of your value of your life insurance policies. You may be able to include proceeds in your estate.

If you are trying to create an estate plan in Anaheim and want to learn more about how you can reduce the size of a taxable estate, call our office today for a consultation.

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