What is the transfer for value rule in life insurance?

According to Internal Revenue Code Section 101(a)(2), if a policy or any interest in a policy is transferred for valuable consideration, the death benefit which will be excluded from gross income is limited to the value of the consideration paid plus any premiums paid by the transferee after the transfer.

One is, if you transfer the policy in a way that does not trigger income taxation, so that the recipient gets what we call a substituted basis, they're

Gratuitous transfer: When the transferor of a life insurance policy receives consideration and is discharged from a policy loan obligation on the

For example, if two shareholders in a closely held business take out life insurance policies on themselves and name each other as beneficiaries to form a buy-sell agreement, then the recipient of the death benefit proceeds from the policy of the partner who dies first will face a substantial tax bill under the transfer

According to Reg Sec 1.101-1(b), a total transfer of the privilege to collect all or a portion of the proceeds from life insurance for value, or the mere development of

For example, if two shareholders in a closely held business take out life insurance policies on themselves and name each other as beneficiaries, the recipient of the death benefit proceeds from the policy of the partner who dies first will face a substantial tax bill under the transfer-for-value rule.

In general, life insurance death benefits are exempt from taxation. If, however, you transfer a life insurance policy to another party in exchange for money or any

As a general rule, proceeds a beneficiary of a life insurance policy receives when the insured dies are entirely income tax free. However, an easily missed tax trap

Transfer for Value Rule on Life Insurance. One of the key benefits of any kind of life insurance is the tax-free death benefit. However, some speculators began to