Insurance proceeds payable to a beneficiary other than the executor of the decedent’s estate are included in the decedent’s gross estate, under Internal Revenue Code (IRC) § 2042, if the decedent, at the time of his or her death, possessed any “incidents of ownership” in the policy. The term “incidents of ownership” is described in the IRC Regulations at § 20.2042-1(c)(2):
For purposes of this paragraph, the term “incidents of ownership” is not limited in its meaning to ownership of the policy in the technical legal sense. Generally speaking, the term has reference to the right of the insured or his estate to the economic benefits of the policy. Thus, it includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy, to revoke an assignment, to pledge the policy for a loan, or to obtain from the insurer a loan against the surrender value of the policy, etc.
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