With so much buzz about the estate tax returning in 2011, many people are taking a closer look at just what constitutes the value of their estate.
Some items are obvious – your home for example, your cars and your personal belongings, but what about life insurance? Is that considered part of your estate as well?
The answer is yes and no.
If the life insurance policy is “owned” by you, then yes, the proceeds of the policy will be included in calculating the value of your estate. If however, you transfer ownership of the policy to someone else – such as a family member – then the proceeds are not included in the calculations.
And here’s one more little tidbit when calculating your estate value: If you designate your spouse as the beneficiary, the proceeds will not be subject to estate taxes. Life insurance proceeds are only taxed when the beneficiary is someone other than your spouse.