From: "cal-lester" 
Newsgroups: misc.invest.financial-plan
Subject: Re: ownership of life insurance policy and estate taxes
Date: 7 Sep 2003 21:15:04 GMT
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TTRoberts wrote:
> beliavsky@aol.com, you asked:
> 
> <<  Suppose my wife and I each own life insurance policies on
> ourselves, with death benefits exceeding the $1 mil estate exemption
> of 2011 and beyond. If we named our son the beneficiary, there would
> be estate taxes on the amount over $1 million when either of us
> die.>> 
> 
> Who you name as beneficiary doesn't effect estate taxes.
> 
> If just one of you dies first and the other survives, there would be
> NO estate tax as there is still an unlimited marital deduction where
> a surviving spouse gets it all without having to pay federal estate
> tax.  It's when the surviving spouse dies that there would be an
> issues of federal estate tax.  As the law stands now, if the
> surviving spouse dies in year 2011 and beyond, that amount in the
> estate beyond the $1 million would be subject to estate taxes no
> matter who's the beneficiary of the life insurance. 
> 
> << If I own the policy on my wife and she owns the policy on me,
> when I die the policy on me will not be part of my estate, so there
> would be no estate tax on the death benefit.
> 
> Thus it seems to me that each spouse owning the policy on the other
> spouse can reduce estate taxes in some cases. Am I right?  >>
> 
> Because of the unlimited marital deduction, who owns the policy is
> not an issue until the first one dies.  So, having the ownership set
> up this way could create more problems than it solves.  In other
> words, when you die, there will be not federal estate taxes whether
> you or your wife owns your policy. 
> 
> If you wife's policy is some form or cash value policy and YOU own
> it, the cash value of that policy will be part of YOUR estate - but
> still not subject to federal estate tax.  And the policy ownership of
> her policy could then go to her or perhaps a trust to keep the death
> benefit of her policy out of her estate.


            All of the above IS correct, PROVIDED, that they BOTH have
            "I Love You Will's". That is to say that the SPOUSE is the SOLE
            Beneficiary of each Decedents Estate. In that case, the value of
            the Estate at the Death of the First Spouse would NOT be Federal
            Estate taxable.
            However, the "inclusion" of the Decedant's Estate into that of the
            surviving Spouse will INCREASE the size of that Spouse's Estate,
            causing potential IMMENSE tax consequences.
Cal Lester CLU



-- 
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