Legal Question in Insurance Law in Pennsylvania

Transfer for value rule (S Corporation)

Scenario:

''A Corporation'' owns a TERM policy valued at $750,000.

''A Corporation'' transfers ownership of the policy to indivudual owner of ''B Corporation'' which is buying ''A Corporation''.

No consideration ($$) is taking place for the policy.

What are the potential tax scenarios for this sort of transaction? What would the tax situation be whenthe person dies and monies are received for the policy.

Thank you so very much for any help offered!

Karyn


Asked on 9/09/04, 11:15 am

1 Answer from Attorneys
Andrew Solomon Law Office of Andrew A. Solomon

Re: Transfer for value rule (S Corporation)

You really should seek the advice of an accountant or tax lawyer to learn the the tax consequences of your scenario. You refer to the policy as a Term Policy. Generally, a term policy has no cash value and pays the insurance to the beneficiary of the policy upon death, and a term policy assumes that premiums are paid on a regular basis. Whole life policies have a cash value; can be purchased with one set premium, and pay interest plus the death benefit. Ownership of a whole life policy can be transferred. These are simply general statements, and your situation really warrants a consultation with an expert.

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Answered on 9/09/04, 9:35 pm


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