Life insurance proceeds are often assumed to be tax free, yet estate and income tax rules can significantly alter that outcome when policies are structured or transferred incorrectly. This practical course provides tax and financial professionals with a clear understanding of when life insurance proceeds are excluded from income and estate tax—and when they are not. Participants will analyze the income and estate taxation of life insurance proceeds, review common transactions that inadvertently trigger taxation, and examine planning strategies to preserve tax‑favored treatment.
The course explores policy ownership structures, transfers of policies among related and unrelated parties, the transfer for value rules and their exceptions, and the strategic use of irrevocable life insurance trusts (ILITs). Real world examples highlight how careful planning can help minimize income and estate tax exposure while avoiding costly mistakes that impair client outcomes.
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2029 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
Publication Date: August 2026
Designed For
This course is designed for professionals who advise clients on estate planning, insurance planning, and wealth transfer strategies.
Topics Covered
- Income tax treatment of traditional life insurance proceeds
- Estate tax inclusion and ownership considerations
- Irrevocable life insurance trusts (ILITs) and Crummey withdrawal powers
- Transfer‑for‑value rules and tax consequences
- Statutory exceptions to transfer‑for‑value taxation
- Transfers involving grantor trusts and the insured
- Planning techniques to minimize income and estate taxation
Learning Objectives
- Differentiate the income tax and estate tax treatment of life insurance proceeds
- Identify transactions that cause life insurance proceeds to become taxable
- Analyze the tax consequences of transferring life insurance policies to related and unrelated parties
- Apply transfer‑for‑value rules and statutory exceptions to common planning scenarios
- Evaluate ownership and transfer strategies designed to preserve the tax‑exempt nature of life insurance proceeds
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
None
Advance Preparation
None
Instructor
Klaralee R. Charlton
Klaralee Charlton is a Partner at 3i Law in Denver, Colorado. She practices fiduciary tax, estate administration, and business transactional law. As part of her practice, she guides clients through the process of administering a loved one’s estate including the collection, valuation, management and transfer of assets including financial accounts, real estate, and business interests with a focus on minimizing estate and income tax liability. Klaralee also works closely with trustees of ongoing trusts to ensure compliance and prepares clients’ fiduciary income tax returns annually.
Klaralee has written and lectured on topics including estate and gift tax, fiduciary income tax reporting and U.S. regulations governing the valuation of small family businesses. She is an active member of the Colorado Bar Association, Tax Section and Adjunct Profession at the University of Denver, Graduate Tax Program.
She earned her J.D. in 2011 from the University of Utah, S.J. Quinney College of Law, her LL.M. in Tax Law from the University of Denver in 2013, and her B.A. in political science in 2009 from Bryn Mawr College. She is admitted to practice in both Colorado and Montana.