§2042 — Title 26 Internal Revenue Code | U.S. Code

Summary

Life insurance on a person who dies can be counted in their taxable estate. Proceeds paid to the estate's executor are always included. Proceeds paid to other beneficiaries are included if the deceased still held any "incidents of ownership" in the policy at death — meaning rights over the policy, alone or with someone else. A reversionary interest (a chance the policy or its proceeds could come back to the deceased or their estate) counts as an incident of ownership only if it was worth more than 5 percent of the policy's value just before death, measured by standard actuarial methods.

Title 26, §2042

Internal Revenue Code — Source: USLM XML via OLRC

The value of the gross estate shall include the value of all property—

(1)To the extent of the amount receivable by the executor as insurance under policies on the life of the decedent.

(2)To the extent of the amount receivable by all other beneficiaries as insurance under policies on the life of the decedent with respect to which the decedent possessed at his death any of the incidents of ownership, exercisable either alone or in conjunction with any other person. For purposes of the preceding sentence, the term “incident of ownership” includes a reversionary interest (whether arising by the express terms of the policy or other instrument or by operation of law) only if the value of such reversionary interest exceeded 5 percent of the value of the policy immediately before the death of the decedent. As used in this paragraph, the term “reversionary interest” includes a possibility that the policy, or the proceeds of the policy, may return to the decedent or his estate, or may be subject to a power of disposition by him. The value of a reversionary interest at any time shall be determined (without regard to the fact of the decedent’s death) by usual methods of valuation, including the use of tables of mortality and actuarial principles, pursuant to regulations prescribed by the Secretary. In determining the value of a possibility that the policy or proceeds thereof may be subject to a power of disposition by the decedent, such possibility shall be valued as if it were a possibility that such policy or proceeds may return to the decedent or his estate.

Editorial Notes

Amendments

1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

§2042 Proceeds of Life Insurance

Summary

Title 26, §2042

Notes & Related Subsidiaries

Editorial Notes

Amendments

Citations & Metadata