In: Accounting
Walter owns a whole-life insurance policy worth $52,000 that directs the insurance company to pay the beneficiary $260,000 on Walter’s death. Walter pays the annual premiums and has the power to designate the beneficiary of the policy (it is currently his son, James). What value of the policy, if any, will be included in Walter’s gross estate upon his death?
In the above case Walter has directs the Insurance Company to pay the beneficiary (His Son James)$2,60,000 upon his death. Hence the life insurance policy had a living, designated beneficiary at the time of the policy owner's death.
So the insurance proceeds go directly to a beneficiary, bypassing the estate, the money belongs to the beneficiary. Friends, relatives, and insurance beneficiaries are not responsible for paying any debts the decedent left behind, so the money is out of the reach of his creditors. The life insurance proceeds don't have to be used to pay the decedent's final bills.
Hence Insurance Policy value will not be included in the Walter's gross estate upon his death.