Transferring life insurance policy ownership (also called an assignment) involves changing who owns and controls the policy. The new owner gains all rights and responsibilities including the right to name beneficiaries, access cash value, pay premiums, and make policy decisions. Ownership transfers are used in estate planning (transferring to an ILIT), business arrangements (transferring between partners), and personal situations (divorce settlements).
To transfer ownership, the current owner completes an assignment form provided by the carrier. The form must be signed by both the current owner and the new owner, and submitted to the carrier for processing. Some carriers require the form to be notarized. The transfer takes effect when the carrier records it.
There are important implications to consider. For estate tax purposes, if the original owner (who is also the insured) transfers ownership and dies within three years, the death benefit is still included in the taxable estate under the three-year lookback rule. This is particularly relevant for ILIT transfers. Gift tax may also apply to the transfer — the current cash value and any future premiums paid by the new owner may be considered gifts.
For business transfers, ensure that insurable interest exists (or existed at policy inception). Transfers between business partners as part of a buy-sell agreement restructuring are common and generally straightforward. For divorce situations, policy transfers may be ordered by the court as part of the property settlement.
A licensed agent in our network can help facilitate the ownership transfer process. For estate planning and tax implications, consultation with an attorney and tax professional is recommended. Guarantees on permanent policies are backed by the financial strength and claims-paying ability of the issuing carrier.