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Transferring Life Insurance Policy owner. Taxable?
I live in missouri. We just opened up an account on my mother yesterday. They are requiring we fill out a form to transfer her from owner to me. In this form it says "The change of ownership of a life insurance policy may have tax consequences. We recommend that you
consult your tax advisor with any questions you may have prior to making this change of ownership." HHR Block doesn t seem to know what it means either. This is a brand new policy. No interest or cash is on it. Will I have to pay taxes on the policy whenever it s paid out?
There is no cash value on it currently, so it isn't a gift. And I've paid all expenses on the Policy
3 Answers
- EvaLv 72 years ago
How much was the premium on the policy? Why would you have to transfer ownership already? The ownership should have been established on the original application. The tax consequences involve gift tax. If the premium was $15,000 or more then it is considered to be a reportable gift. That doesn't mean that there are taxes due on it, just that it needs to be looked at in the overall scheme of things. Since the lifetime exclusion for gifts is so high, few people have to pay the gift tax. Life insurance proceeds are tax exempt to the beneficiary. If it's cashed in prior to death, any amount over the premiums paid is taxable.
- Anonymous2 years ago
Does your paperwork state the current value of the policy if cashed out? The reason I ask is that the insurance company is the only one that can give you the value. If that is more than $15,000, *she* (as previous owner) has made a taxable gift of the amount in excess of $15,000.
- Steve DLv 72 years ago
Follow the instructions - consult a tax advisor such as a real tax accountant or tax attorney who is familiar with with insurance and taxes. HR Block folks are typically not trained in this type of stuff.