Legal Question in Wills and Trusts in Illinois

Ownership of life insurance policy

I know of someone who advises that a wife should own the life insurance policy on her husband's life and pay the premiums from her own checking account to prove her sole ownership of the policy, for the purpose of avoiding probate administration of the death benefit. Is this an accurate assessment of probate law in regards to life insurance? I thought life insurance skipped probate if the named beneficiary is not the insured's estate.


Asked on 8/05/06, 2:32 pm

1 Answer from Attorneys
Cyndi Perez Trostin

Re: Ownership of life insurance policy

Life insurance does not become a part of the probate estate unless the beneficiary is the estate, or it defaults to the estate.

However, for purposes of estate tax, it is added to the other assets of the estate in order to determine the gross taxable estate.

For estate tax purposes, proceeds of life insurance policies may be kept out of the taxable estate if the decedent does not maintain control or ownership over the policy during his lifetime.

Therefore, having a spouse own the policy may be tough to prove that the decedent didn't still have control. For this reason many people will set up an irrevocable insurance trust to own the policy.

If you would like to know more about this area, please consult with an experienced estate planning attorney. The laws governing here are complex and mistakes can easily be made.

This posting does not constitute legal advice. It is based on hypothetical questions only.

Good luck to you.

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Answered on 8/05/06, 2:47 pm


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