How to Transfer Life Insurance Policies From One Spouse to Another
- 1). Consult with a tax adviser. The technique of transferring your life insurance to decrease your tax liability upon your death is only useful if your estate is likely to owe federal taxes. Have a professional assess your situation to see if this is an appropriate tool for you.
- 2). Think ahead, and do the transfer in a timely manner. This can obviously be hard to plan for, but if you die within three years of having transferred the policy, it will still be regarded, under IRS rules, as part of your estate for tax purposes.
- 3). Advise your insurance company of your plans, and ask for the paperwork required to complete the transaction. You will have to change the wording of the policy itself, as well as complete a document called an "assignment" or a "transfer." There is usually no charge for this type of transaction.
- 4). Make sure you have not retained any significant control over the policy. The IRS might still regard the policy as part of your estate if you continue to retain control to named beneficiaries, if you borrow against the policy or if you cancel it. Any of these moves must now be made solely by your spouse.
- 5). Ensure premiums continue to be paid by your spouse. Once you have transferred ownership, your spouse will be responsible for keeping premium payments up to date.
Source...