Life insurance is unique property in some aspects. Death benefits from your life insurance are generally paid income-tax free to your beneficiaries. But the proceeds still can be subject to estate taxes if you own the insurance contract when you die.
Title determines ownership.
Having the right to change beneficiary designations can also indicate ownership and cause inclusion in your estate. How to minimize estate taxes on life insurance You can generally reduce the possibility of an estate tax on existing life insurance policies through a transfer of ownership to another person or to an irrevocable trust. You must live three full years after the gift completion date to place the insurance outside your estate for estate tax purposes. Your insurance proceeds usually can escape estate taxation. If you want new life insurance for estate purposes, it could be purchased and owned by a relative or by an irrevocable life insurance trust.