Can the ownership of a life insurance policy be changed?
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Asked October 14, 2011
The ownership of a life insurance policy can be important, especially if you want to avoid paying estate taxes on the benefits when the policy pays out. Many tax professionals will tell you that the easiest way to avoid paying taxes on a life insurance policy is to transfer the ownership of the policy to one of the listed beneficiaries. By doing that, the policy will not be included in your estate and will not be subject to taxation or other claims against the estate. Transferring the ownership of a life insurance policy is a risky proposition, but it is the may be the only way to avoid taxation of the payout when you pass away.
Note that once the ownership of the policy is transferred, you will not be the responsible party for premium payments, nor will you have access to the cash value as you would as the owner. This means that you will not be able to borrow against the policy yourself, but will have to have the named owner do it. It also means that the person you name as the owner will be able to borrow against your policy and could potentially reduce the amount of the final payout, cancel the policy or alter the investment options, all without your knowledge or permission.
To transfer the ownership of a life insurance policy, you need to contact the customer service department of your insurance company or the agent who sold the policy to you. They will provide you with a form called a Transfer of Ownership or Designation of Successor Owner. Fill this form out and return it to the service center or customer service department of the insurance company, and the transfer will be initiated.
Answered October 14, 2011 by Anonymous