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IRS Rules That Descendant’s Life Insurance Policies Without Powers Of Appointment And Conversion Are Not Subject To Estate Tax

In an IRS Letter Ruling, the IRS decided that two life insurance policies were not includible in the gross estate of a decedent.  In the case, two trusts owned a limited partnership which owned two life insurance policies.  On the two life insurance policies, the decedent removed the powers of appointment and conversion from himself and placed the powers in his sister and his wife.  Because the insured did not have power of appointment within himself, the insurance policies were not includible in his estate and were therefore not subject to estate tax.

Points of Interest

  • Out of the millions receiving early distributions, utilization of the “Do-Over” option is relatively unused.
  • If you are healthy and longevity is within your family health history, there is a good chance you will recover the investment and more.
  • Even though it may seem like an expensive option, the “Do-Over” is relatively inexpensive when considering inflation adjusted increases and when compared to other investments.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors