In CCA 201328030, the Service held that the retention of the right to receive dividends on a life insurance policy will not cause inclusion of the life insurance policy in the decedent's estate.
A decedent and his former spouse divorced, and as part of the divorce settlement, the decedent was required to maintain life insurance on his life for the benefit of his former spouse. The decedent was entitled to the dividends paid from the policy.
Under § 2042 of the Internal Revenue Code, if an individual dies while retaining certain incidents of ownership over a life insurance policy, it will be included in that individual's estate. "Incidents of ownership" include, for example, the power to change the beneficiary of the policy, to surrender or cancel the policy, to assign the policy or to pledge the policy for a loan.
The Service determined in this CCA that the right to dividends was not an incident of ownership under § 2042 of the Internal Revenue Code. Therefore, the life insurance policy was not included in the decedent's estate.
