Taxation of Life Insurance Proceeds (Currently Unavailable)
Author: Klaralee R. Charlton
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2024 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
Life insurance proceeds are traditionally thought of as exempt from income tax. However, transfers of policies during life can transform a tax-exempt asset into a taxable one—sometime unintentionally. In this course we will review the income tax rules relating to life insurance proceeds and the transactions that transform the taxation of policy proceeds. We will then identify the best transfer methods for taxpayers desiring to transfer policies while maintaining the tax-exempt status of the policy proceeds.
Publication Date: July 2021
Designed For
Attorneys, CPAs, and Enrolled Agents.
Topics Covered
- Traditional Life Insurance Proceeds
- Income Tax Consequences
- Estate Tax Consequences
- Using Trusts to Avoid Gift & Estate Tax
- Irrevocable Life Insurance Trust
- Crummey Trusts
- Transferring a Policy for Value
- Tax Consequences for Seller
- Tax Consequences for Buyer
- Exceptions to Transfer”for”Value Rules
- Transfers to the Insured Using Grantor Trusts
Learning Objectives
- Describe the taxation of life insurance proceeds
- Identify the methods for transferring life insurance policies while retaining the tax-exempt character of the policy proceeds
- Identify opportunities to minimize the taxation of life insurance proceeds
- Recognize and analyze the consequences of transferring life insurance policies to related and unrelated parties
- Identify how to recommend ideal transfer methods for life insurance policies to minimize income taxation
- Recognize what is taxable to the traditional life insurance beneficiary
- Identify what is includable in the decedent's gross estate for estate tax purposes
- Describe who is responsible for signing Form 712
- Describe what disqualifies a trust from being a grantor trust
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
None
Advance Preparation
None
