California Code of Regulations › Title 18 - Public Revenues › Division 2.5 - State Controller › Chapter 1 - Inheritance Tax › Article 4.5 - Insurance › Section 13724.1 - Insurance Paid Partly from Community and Partly from Separate Funds, Date of Death Prior to January 1, 1981

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
If the premiums on a policy of insurance issued on the life
					 of a deceased spouse and payable to the surviving spouse have been paid partly
					 from community funds and partly from separate funds, and the decedent had
					 retained the legal incidents of ownership in the policy until death, one-half
					 of the proportion of the insurance proceeds which is community is excluded as
					 community belonging to the surviving spouse (see Revenue and Taxation Code
					 Section
					 13551).
					 In addition, $50,000 of the remaining proceeds are excluded by reason of the
					 insurance exclusion (see Section
					 13723). Also, the separate
					 property in the insurance is taken into consideration in determining the amount
					 of the marital exemption under Code Section
					 13805 as it applies to decedents
					 dying prior to January 1, 1976, and to the marital exclusion under the
					 amendment to Section
					 13805, effective as to decedents
					 dying on and after January 1, 1976 (see Section
					 13805). However, in calculating
					 the one-half of the clear market value of decedent's separate property (factor
					 (1)) for the purpose of determining the maximum marital exemption or exclusion
					 to which the surviving spouse is entitled, the separate property in the
					 insurance proceeds must be reduced by the proportionate share of the $50,000
					 insurance exclusion which applies to such separate portion of the insurance
					 proceeds.
This regulation may be illustrated by the following
					 example:
EXAMPLE. A at his death in 1976 left a $200,000 insurance
					 policy on his life payable to his wife, B, the premiums on which were paid
					 three-fourths from community funds and one-fourth from A's separate funds, and
					 as to which the legal incidents of ownership were retained by A until his
					 death. In addition A left separate property having a value of $100,000 all of
					 which he left to B. B would be entitled to exclusions totalling $193,750, of
					 which $75,000 is within the community exclusion, $50,000 within the insurance
					 exclusion, and $68,750 within the marital exemption or exclusion. The marital
					 exemption or exclusion is computed as follows:
(1) One-half the net value of decedent's
				  separate property:
1/4 x $200,000 = $50,000,
							 separate property insurance
1/4 x $50,000 = $12,500,
							 proportion of insurance exclusion applicable to separate property
							 insurance
$ 50,000
12,500
$ 37,500
100,000
Other separate property
$137,500
$137,500
=
							 $68,750
2
(2)
				  Amount of property received by wife which is not exempt:
$200,000
Insurance proceeds
100,000
Other separate property
$300,000
Total received by
							 wife
75,000
Less community exclusion
$225,000
50,000
Less insurance exclusion
$175,000
Factor (1) is lower, so $68,750 is the marital exemption or
					 exclusion.
1. Amendment
					 of section title filed 7-2-81; effective thirtieth day thereafter (Register 81,
					 No. 27).
Note: Authority cited: Section
						14740,
						Revenue and Taxation Code. Reference: Section
						13724,
						Revenue and Taxation Code.