Some people change ownership of a life insurance policy because they do not want it included in their estate for tax purposes. Another reason to change ownership if because the owner has developed dementia, Alzheimer's, or a mental or physical illness that makes it difficult or impossible to handle that role in a responsible fashion. If someone takes over payment of a policy, that is another reason that someone might change ownership of a life insurance policy to themselves.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Another reason that some change the ownership of their policy is to move ownership to a living trust. Care should be taken to make sure that the change of ownership doesn’t trigger an unexpected taxable event. Get professional advice before any change.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Ownership of a life insurance policy is generally changed for estate tax purposes so the proceeds are not included in the calculation of the estate.
This is commonly seen in placing the policy in an ILIT (irrevocable life insurance trust - the trust becomes the owner and beneficiary of the policy, controlling how the proceeds are distributed).
Ownership may also change because the owner passed away (if the owner is not the insured on the policy).
Great question! There are several reasons why you might want the ownership transferred. As those fine folks mentioned, tax considerations are a good reason; The inability to manage the affairs due to declining mental health or the death of the owner is another. Another very common reason is the transferring of ownership from the parent, to the insured child once they are in a position to assume that ownership. In my case, I purchased policies for my kids when they were little ( if you have kids, do it as soon as possible also, and save yourself and them a ton of money over their life) and will transfer the ownership to them when they are capable of assuming the payments. If you have further questions, I'm happy to help, just contact me. Thanks for asking!
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This is commonly seen in placing the policy in an ILIT (irrevocable life insurance trust - the trust becomes the owner and beneficiary of the policy, controlling how the proceeds are distributed).
Ownership may also change because the owner passed away (if the owner is not the insured on the policy).