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Warren's Heaton on Surrogate's Court Practice
Copyright 2017, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

10-155 Warren's Heaton on Surrogate's Court Practice 155.syn


Insurance on Estate Tax Return


Linda B. Hirschon, Greenberg Traurig, New York;Andrew L. Martin, Esq. Chief Court Attorney--Referee, Surrogate's Court, Nassau County;Eugene E. Peckham, Surrogate, Broome County;C. Raymond Radigan, Chairman, EPTL-SCPA Legislative Advisory Committee;Joshua S. Rubenstein;Peter N. Wells, former Surrogate, Onondaga County;* Chapter 155 was updated by Jurij Mykolajtchuk, Law Offices of Jurij Mykolajtchuk, New York, NY, and Princeton, NJ.

Chapter Summary


Every policy of insurance on the life of the decedent, whether or not it is included in the gross estate, must be listed on Schedule D federal estate tax return (Form 706). However, insurance on the lives of others is listed elsewhere. This chapter, from Warren's Heaton on Surrogate's Court Practice (Matthew Bender), covers information which should be included when filing Schedule D, definitions of insurance, exclusions, life insurance trusts, amount of insurance to be included in the gross estate, and insurance of nonresident aliens.

Insurance on the life of the decedent receivable by the executor is includible in the gross estate, regardless of who owned the policy or paid the premiums. Insurance on the life of the decedent receivable by other beneficiaries is includible if the decedent possessed at his death any of the "incidents of ownership" in the policies, either alone or in conjunction with another. The IRS interprets the term "insurance" broadly, and the chapter considers death benefits beyond the conventional life insurance policy which will also be treated as insurance for purposes of inclusion in the decedent's gross estate. In addition, the chapter discusses National Service Life Insurance policies, and accident and health insurance proceeds, and distinguishes annuities and wrongful death benefits, which are not includible as insurance.

The chapter further explains the "incidents of ownership" test which applies to insurance on the life of the decedent receivable by a beneficiary other than the estate. Factors considered include the right to change the beneficiary or to assign the policy. Furthermore, the chapter explains that proceeds from a life insurance policy may be included in a decedent's gross estate if the decedent transfers (by trust or otherwise) an interest within three years of death. The test for inclusion no longer looks to who paid the premium on a policy. However, payment of premiums by someone other than the decedent will affect the amount of the proceeds includable in the gross estate and there may be a pro rata exclusion. The chapter covers reversionary interests in a policy which may cause inclusion of an amount of the insurance proceeds, and valuation of a reversionary interest. The chapter also explains the distinction between incidents of ownership as "exercisable" and "possessed," and discusses assignment divesting the insured of incidents of ownership, and treatment of the proceeds of group term life insurance.

The chapter next considers buy-sell agreements for closely-held corporations and partnerships, whereby the surviving owners agree to purchase the shares or interest of the decedent from the decedent's estate, funding the obligation by an insurance policy. In addition, the chapter discusses the treatment of life insurance proceeds in community property states, whether proceeds are payable to the decedent's estate, the surviving spouse, or someone else. The chapter also covers life insurance trusts used as a device to avoid inclusion and minimize the estate tax, and other exceptions to inclusion of the full amount of insurance proceeds. For example, if the beneficiary has no right to a lump sum payment, or the decedent retained a reversionary interest amounting to less than 5% of the policy, or the policy was transferred within three years of death but the transferee paid the premiums, a commuted value or pro rata portion of the total insurance amount is includable instead of the whole proceeds. Finally, the chapter discusses proper reporting of dividends, policies subject to a loan, and insurance on the life of a nonresident alien.

Warren's Heaton on Surrogate's Court Practice (Matthew Bender) provides comprehensive coverage and analysis of New York Probate and Estates practice issues. Accepted by the courts as the leading authority on practice in Surrogate's Court, topics include jurisdiction, intestacy, probate, appointment of representatives and guardians, estate administration, fiduciary duties, accounting, commissions and fees, litigation, Federal and New York estate tax, and construction of wills and trusts. The treatise covers case law affecting substance and procedure; analysis of SCPA, EPTL, and related statutes; procedural guidance; and over 1,000 forms including official New York Surrogate's Court Forms and current Federal and New York estate tax forms with explanations. The treatise also covers Reformation and Trust-splitting issues, Supplemental Needs Trusts, Uniform Transfers to Minors, and Revocable Living Trusts.


New York surrogate's court,surrogate's court in New York,estate tax return,federal estate tax return,insurance on estate tax return,life insurance trusts,insurance of nonresident alien


For a complete discussion of the federal estate tax, see Chapter 151, Basic Principles of the Federal Estate Tax. For reporting insurance on the life of another, see Chapter 157, Miscellaneous Property on the Estate Tax Return.


For a comprehensive guide to the federal estate tax return, see How to Save Time and Taxes Handling Estates (Matthew Bender).

For further coverage of estate and gift taxation, see Modern Estate Planning (Matthew Bender).

For federal tax considerations when drafting wills, see Drafting New York Wills: Law and Forms (Matthew Bender).

For tax saving techniques in estate planning, see Planning for Large Estates (Matthew Bender).

For annual analysis of developments in estate planning and estate, gift and income taxation, see Heckerling Institute on Estate Planning - University of Miami School of Law (Matthew Bender).
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