23 Jul Tip Tuesday
Welcome to Eagle & Fein, P.C.
🌟 After Connelly: If insurance is owned by a limited company or corporation, can the policy be transferred from the limited company or corporation to the insured to avoid the impact of Connelly?
Yes! A life insurance policy owned by an entity can always be transferred to the insured, without violating the transfer-for-value rules. Violation of the transfer-for-value rules essentially cause the death benefit of a life insurance policy, which is typically income tax free, to be subject to income tax on the pay out of the death benefit (like an annuity). Nobody wants to convert an income tax free asset into one subject to income tax. The challenge is if the policy is owned by the insured, how will it be used to pay the purchase price required under the buy-sell agreement on the insured owner’s death?
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