If a decedent owned a life insurance policy on their own life with the spouse named as beneficiary, how is the policy treated for the decedent's gross estate for estate tax purposes?

If a decedent owned a life insurance policy on their own life with the spouse named as beneficiary, how is the policy treated for the decedent's gross estate for estate tax purposes?

• A. It is included in the gross estate.
• B. It is never included.
• C. It is included only if the policy is in a trust.
• D. It is excluded if the beneficiary is the spouse.

Answer: (A)

Ownership determines whether a life insurance policy on the decedent’s life is included in the gross estate. If the decedent owned the policy at death, the death benefit is included in the decedent’s gross estate, even if the beneficiary named is the spouse. The key is that the decedent possessed incidents of ownership—rights to change beneficiaries, borrow against the policy, surrender it, or terminate it—which keeps the policy’s value inside the estate for tax purposes. If instead someone else owned the policy, the estate inclusion would depend on that owner’s status, not the decedent’s.

Ownership determines whether a life insurance policy on the decedent’s life is included in the gross estate. If the decedent owned the policy at death, the death benefit is included in the decedent’s gross estate, even if the beneficiary named is the spouse. The key is that the decedent possessed incidents of ownership—rights to change beneficiaries, borrow against the policy, surrender it, or terminate it—which keeps the policy’s value inside the estate for tax purposes. If instead someone else owned the policy, the estate inclusion would depend on that owner’s status, not the decedent’s.