Incidents of ownership refer to rights or privileges that an individual holds in an insurance policy, property, or other assets. These rights include the ability to change beneficiaries, surrender or borrow against the policy, or exercise control over the asset in question. In the context of life insurance, incidents of ownership are crucial in determining whether the policy proceeds will be included in the insured’s estate for estate tax purposes. For example, if an individual retains certain incidents of ownership in a life insurance policy, such as the right to change beneficiaries or borrow against the cash value, the policy proceeds may be considered part of their taxable estate upon death. Understanding and managing incidents of ownership are essential considerations in estate planning and asset protection strategies.
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This glossary post was last updated: 29th March, 2024.
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