A recent WealthManagement.com article tackles this term head-on with an article aptly titled “Incidents of Ownership.” The IRS employs this term to differentiate those life insurance proceeds that will count a part of the “gross estate” value and those that will go scot-free to the family as intended.
Unfortunately, ensuring there are no incidents of ownership is not just about buying the right policy, but structuring the ownership and beneficiary arrangements accordingly. Oftentimes a very specific form of “irrevocable” trust is required. Teaching point: the time to plan for tax-savvy protection of your life insurance begins before the application for the insurance is inked.
